Before we take a loan, we should assess whether we can afford it. The fact that the bank will decide to grant us a loan does not mean that we will be able to deal with the repayment of monthly installments without any problems. We have to decide about this ourselves. Nevertheless, we assess our financial standing here and now, possibly wondering what will happen in a few months or years. However, we are never able to predict whether random events will happen to us that will worsen our financial situation and will not, for a moment, prevent us from paying our liabilities.
Before you take a loan, especially a long-term one, it’s also worth finding out what your bank has to offer in such a situation. You should know that banks offer such products as credit holidays or grace period in paying installments.
As the name implies, credit holidays are, colloquially speaking, a break in loan repayment. At our request submitted to the bank that granted us the loan, we can seek to postpone the repayment date. For a period of 1 to even 12 months, we may have a break in paying off debts. However, it is worth asking about this before signing the loan agreement, because not every bank offers credit holidays. The amount of deferred installments will be added in proportion to the other installments of the loan, the loan period may be extended to us according to how long we had a break or the total amount of deferred installments will be added to the last installment of the loan. It all depends on the bank’s offer.
Payment grace period
An installment grace period is a more popular product than a credit holiday. It is also much easier to obtain. An installment grace period is also a deferment of the repayment date, which applies only to the capital part of the loan, not the entire monthly installment. The grace period for paying the installment is the same as for credit holidays, i.e. from 1 to 12 months. An installment grace period can also help us in situations of temporary financial problems. However, its application is cost-effective primarily at the end of the loan period, when the interest part of the loan has already been repaid by us, we have a loan with decreasing installments or in the second half of the loan period, when the interest part of the installment is much lower.
Credit holidays and grace period
Both credit holidays and installment payment grace are banking products that will help us deal with temporary financial problems. What makes these products different is that in the case of credit holidays, the payment date of the entire installment is postponed. However, in the case of grace in repayment of installments, the deferral of repayment applies only to the capital part.