By issuing a loan at the bank or lending organization, the borrower agrees to make monthly repayments and pay the full amount according to the lending requirements. But it happens sometimes: due to the current situation, you are not able to make your repayments, and you need to take a break from them for a certain period. Is it possible to take a deferment on a loan, and what is required for this?
What to do if I can’t pay loan repayment?
In order not to incur risks (collision with collectors or loss of property issued to the bank as collateral) and not create difficulties for credit managers, the borrower may formally ask the lender to postpone the payment term under the loan agreement. It is easier than you can imagine:
- Contact your bank or filial of organization to make an appointment;
- Explain your situation to the duty person;
- Make an agreement under your “special circumstances”
The borrower receives a “credit vacation” and time to improve the situation and save the opportunity to repay the loan in the future.
What is important to consider by deferring loan repayments?
First and the most important thing: don’t be quite. Life brings surprises, and sometimes you can be totally destroyed from this news, but how can your bank be informed about that? Just if you tell them!
The borrowers #1 mistake is “hiding my head into the sand”
Don’t be afraid to inform your lender: moving quickly helps you minimize the damage to your finances.
If you stop paying your loan without announcement and any new agreement, you will owe more money because of penalties, fees and possible legal costs. So it is better to consider a certain time period during which you may not pay a specific part or the entire loan.
How to restructure an existing loan?
On Pilipinas there are different ways to ask for a loan deferment at a bank. It may be given in the following options:
- Transfer of payment terms for the principal debt. For example, you can defer your next three monthly repayments, taking break for 90 days. The debtor pays only interest. The maximum period for such a delay is 1 year.
- Defer payment of interest on the loan. The borrower temporarily repays only for the main part of the loan. A profitable option for those who want to reduce the overall overpayment on the loan amount.
- Deferral for both payments. Most often this option is given only to reliable customers and for the short term – up to 3 months.
- Revision of loan conditions. Here, the borrower will have to provide the bank with a convenient restructuring plan for the agreement containing reasonable arguments (that “special circumstances” like death of family members or serious illness). The client must convince the lender that it will be beneficial to both parties.
- Change of scheduled terms of repayments. In this case, if you paid weekly, you can become an offer to pay fortnightly or monthly starting from a new date. When the grace period has expired, the borrower must resume the rest of repayments.
Despite the severity of the situation, the selected type of transfer of loan repayments and the confirmation provided, the lender will decide on the postponement. Anyway applying to defer or amend a loan repayment, the borrower will be asked for a detailed statement of household or private incomes.
Why can my bank reject my application?
Dismissal on the personal initiative of the debtor is not a good reason for granting a loan deferment. Banks also refuse those persons who:
- Previously made delays and did not warn the lender about the problems in a timely manner.
- Deliberately ignored requests and attempts to contact bank employees.
- Already violated the terms of the loan agreement.
- Took a loan less than 3 months ago, but is already trying to delay repayments.
When you realize you will not be able to make a repayment in the next month, try to analyse all your payments and prioritize them. Also contact your lenders and explain the situation: for sure you will find a convenient solution together!