Tips On Using Loan Repayment Holidays

Tips On Using Loan Repayment Holidays

Tips on​ Using Loan Repayment Holidays
If you​ find yourself struggling to​ pay off your loan in​ the​ short-term because of​ unforeseen financial difficulties,​ then perhaps you​ should consider taking a​ repayment holiday .​
Also,​ if​ you​ are looking to​ get a​ loan and want to​ know that you​ can take a​ short break from repayments if​ things are tight,​ then repayment holidays are probably for you​ .​
Here are some tips about how to​ use repayment holidays effectively and the​ consequences of​ doing so.
What is​ a​ repayment holiday?
Just as​ it​ sounds,​ a​ repayment holiday is​ when your lender will allow you​ to​ take a​ break or​ holiday from your monthly repayments,​ thereby helping you​ to​ sort out any financial difficulties that you​ have .​
a​ repayment holiday is​ often taken at​ the​ beginning of​ a​ loan,​ although many companies also offer the​ option to​ take a​ holiday at​ any point during the​ loan term.
Criteria for repayment holidays
Although not all lenders offer loan repayment holidays,​ it​ is​ becoming a​ more common practice .​
If you​ want to​ take a​ repayment holiday at​ the​ beginning of​ the​ loan,​ then you​ can usually get a​ few months break before you​ need to​ start paying the​ amount back .​
However,​ if​ you​ want to​ take a​ break later in​ the​ loan,​ this usually cannot be done within the​ first or​ last six months of​ the​ loan period .​
Also,​ you​ need to​ have made a​ number of​ consecutive payments before being allowed to​ take a​ repayment holiday .​
The length of​ the​ break you​ can have varies,​ but usually ranges from 1 to​ 3 months,​ with not more than 3 months out of​ any year being taken as​ a​ holiday.
Repayment holiday advantages
The main advantage of​ taking a​ repayment holiday is​ that it​ allows you​ to​ deal with unexpected financial problems without worrying about paying off your debts straight away .​
This can be useful if​ you​ are between jobs or​ have had an​ unexpectedly large expenditure for one month .​
Instead of​ getting into more expensive debt on​ a​ credit card,​ you​ can take a​ repayment holiday and just extend the​ loan period.
The costs of​ repayment holidays
Although repayment holidays can be very useful,​ they do come at​ a​ price .​
When you​ take a​ repayment holiday,​ interest on​ the​ loan amount still accrues .​
When you​ start paying again,​ you​ will either have to​ pay the​ normal monthly payment for longer and pay the​ interest at​ the​ end,​ or​ pay a​ slightly higher monthly payment to​ deal with the​ extra interest you​ have accrued .​
This means you​ should only use repayment holidays in​ a​ real emergency .​
If you​ are struggling for more than just a​ month or​ two,​ you​ need to​ sort out the​ problem with your lender rather than take a​ repayment holiday .​
As long as​ you​ use repayment holidays sparingly and understand the​ costs involved,​ they can be a​ great way to​ keep yourself financial stable during unexpectedly tough months.

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