Home and business owners struggling financially due to COVID-19 will be given another four months to resume paying back their loans.
Extended loan deferrals will be provided to those who genuinely need more than the current six-month timeframe, says the Australian Banking Association (ABA), however, extensions won’t be automatic.
While each bank’s deferral policy differs, it’s important to note that deferring repayments on your loan generally doesn’t stop interest from accruing.
As such, customers who are able to repay their loans will resume doing so, says the ABA, adding that it’s in their best interests to do so and allows banks to direct support to those who need it.
800,000 people have deferred their loan repayments so far during the COVID-19 crisis and the four-month extension aims to help the economy avoid the September ‘cliff’ that you’ve probably heard about.
How do you apply for a home loan deferral extension?
The good news is you won’t have to. If repayments on your home or business loan have already been deferred then your bank will contact you when the end of your six-month deferral period nears.
That’s because they’ll first want to discuss some possible options to restructure or vary your loan, including:
– extending the length of the loan – switching to interest-only payments for a period of time – consolidating debt – a combination of these and other measures.
If you’re financially unable to enter into one of the above arrangements by the end of your six-month deferral period, you’ll be eligible to extend your deferral for up to four months.
Will your credit rating be affected?
Good news. If you recommence repayments on your existing loan or enter into a new repayment arrangement, your credit report will not be impacted, provided you meet the new repayment arrangements.
The same goes for if you’re granted an extended deferral period that’s approved by your bank: your credit report will not be impacted.
Want to find out more? Get in touch
If you’d like more information about the repayment deferral extension, or to discuss some possible options for restructuring or varying your loan before the bank puts you on the spot, then please don’t hesitate to get in touch.
We’re here to help you through these difficult times any way we can.
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