Credit hours: yes or no? When does it make sense to pause the loan and when should alternative solutions be sought?
An unfavorable development of the personal life situation can lead to the restriction of one’s own financial possibilities such as:
- Job loss,
- the sudden need for care of a family member,
- a divorce or
- in the worst case, the death of a relative is a drastic experience.
They are also associated with negative financial consequences. A rethink in business can solve first problems. However, economy in everyday life is often not enough to do everyone financially fair. This applies in particular to existing installment payments or loans to be paid off. In order to avoid permanent debts from the outset, it is necessary to act immediately. At the beginning of possible payment difficulties, it is advisable to hold an existing loan. Under no circumstances, however, should those affected suspend a loan installment without first talking to the creditor. The lender may offer the opportunity to pause the loan.
What is a credit deferral?
Borrowers who find themselves in a financial shortage in the short term may have the opportunity to pause a loan. The payment dates for the receivable or the installments are postponed. The feasibility of the claim is still maintained. To put it simply, lenders and borrowers agree to pause the loan for a short time. As a result of the deferral, the debtor can suspend the credit installment. In principle, however, it is not possible to set up a loan at your own discretion. Both parties must always agree to the deferral. In the course of the temporary break, a debt change agreement is concluded so that the lender is also legally secured.
When is a credit deferral useful?
There is no doubt that it makes no sense to take out a loan in order to use the “saved” money for holiday financing. The credit deferral should only be used as a restructuring measure. This means that loan breaks are useful for short-term payment difficulties, for example due to a loss of job. In general, however, it is important to consider whether a goal is in sight at all. If it is clear from the outset that the loan cannot be paid in six months, a year or more, other alternatives may be more effective. This is the case, for example, if an occupational disability has occurred. Even after divorces or a job loss with poor prospects on the job market, the deferral may be helpful at first, but not optimal in the long run.
Loan hours and suspend credit installments – how it works properly
- If there is a need to pause a loan, the lender is the first point of contact.
- Make an appointment with your bank or savings bank and play with open cards from the start. Take with you to your appointment all documents that can be helpful to you in some way and that show your current situation.
- It is also recommended to provide evidence that clearly shows that you will be able to pay again in the foreseeable future. Clarify your lender in detail about your situation and ask him to defer the loan. You should not suspend your loan installment until you have given your consent.
- If an agreement with your contact person is not possible, we recommend going to a debt counseling service. If necessary, the staff there can help you to contact the lender again in order to pause the loan. A third outside opinion can sometimes work little miracles.
Are there any costs if you pause a loan?
Before you take out your loan, however, you should be aware that a break may involve additional costs and fees. However, the amount of the resulting fees cannot be fixed as a lump sum. The additional costs depend on various factors, such as the credit institution. If the possibility of a deferral is already set out in the loan agreement, there should also be further information.
Debt restructuring instead of deferral
In the example cases already mentioned, as well as in many other situations, there are different alternatives. Debt restructuring is a particularly popular alternative. With the help of debt restructuring, existing loans can be completely repaid. Lower rates can be agreed directly for the debt rescheduling loan, which can lead to significant financial relief. Debt restructuring with a focus on cost reduction can also be carried out. Debt rescheduling loans are often associated with lower interest rates and better conditions.