Loan holidays – convenience or a trap? | Free first loan

The money that we can get thanks to loans is a way to achieve our goals and maintain the desired standard of living. Undeniably, loans can help with many problems and make life easier, but only until we experience problems with repayment. Contrary to appearances, this is not a rare situation. Loan holidays can then come to the rescue.

What are loan holidays?

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Loan holidays, which were previously known in banking practice, are the possibility of postponing the payment of one or several installments during the entire loan repayment period. They are especially useful when the borrower experiences temporary financial problems or sudden expenses and is unable to pay the installment on time in a given month. Instead of delaying paying the installment and exposing yourself to the negative consequences of default, you can easily postpone one installment and pay it back together with the next one on the next scheduled date.

Why is it worth using a loan holiday?

Non-bank installment loans are sometimes available with a very long repayment period, which, contrary to appearances, can be problematic. No one is able to predict what his financial situation will look like in a year or two. It is also worth taking into account that at any time we can face a difficult situation: temporary health problems, less pay (it is enough that in one month we do not receive a bonus or incentive supplement), a broken car, a broken pipe and a flooded apartment.

When planning the loan repayment budget, it is also good to take into account “expenditure-intensive” periods, i.e. periods in which the monthly cost of living will be higher than usual. These include primarily the Christmas and holiday periods. In addition, we can always be invited to a wedding or first communion – there are really many such occasions and not all of them can be predicted. Postponing the installment payment will allow you to relieve the budget and be able to finance other expenses.

Comfort or threat?

Loan holidays are a great help for the borrower. The consequences that he could suffer due to non-payment of the loan could further aggravate the uninteresting situation. Not only are these additional costs of delay (14% per annum) due to the creditor or hated by all prompts. In fact, the consequences of non-repayment can be more severe – even in the form of bailiff enforcement (see: What is debt collection?), Not to mention the cost of such proceedings – the bailiff himself will charge 15% of the amount of the liability, but not less than 10% of the average monthly salary .

However, loan holidays will not always work. In the case of the aforementioned temporary problems, they will be the perfect solution. What, however, if the borrower faces long-term problems, such as job loss? It should be remembered that the installment payment will not be canceled, but only shifted. Moreover, in the following month it will be necessary to pay a double installment, which will further undermine personal finances, and maybe even be impossible. In this case, of course, you can take advantage of such holidays, but this is only delaying the consequences in time.