The consumer’s estimation of financial possibilities may sometimes prove unreliable. Due to various random events, the financial situation may collapse. The borrower, in fear of not falling into debt, should then consider extending the cash loan repayment period. What is it about and how to apply for it?
Before deciding to get a loan, many consumers are trying to estimate whether they will be able to bear the financial commitment. After all, a loan is a load spread over time that allows you to buy the item, but also means increased monthly expenses. Loans are usually repaid in installments. These must then be included in the monthly expenses.
How does the bank assess its trust in the consumer?
Banks precedes the decision to grant credit to consumers with a thorough analysis. First of all, the history of repayment of bank and non-bank liabilities (loans, payday loans) is checked. By the way, in the BIK register, banks also see possible information about current or past debt. This allows you to assess how diligent the payer is the applicant and whether entrusting his money will not be a big risk.
In addition, banks are also assessing the client’s income situation. Potential borrowers are asked to submit certificates from the workplace regarding, among others place of work, nature of employment, length of service and type of contract that governs the employment relationship. The consumer must work for at least as long as required by the bank and have a contract (if it is a fixed-term contract) for the time specified in the bank’s regulations.
The last, most important point of verification of a potential borrower is the verification of the amount of earnings received by him. They must be high enough to allow for regular, trouble-free repayment. You must also provide information on your monthly expenses, other obligations and marital status.
What if there are problems with the loan repayment?
If the bank assesses that the above-mentioned parameters show a positive creditworthiness – the path to obtaining a loan is already simple. Unfortunately, good credit standing and, as a result, the financial condition of the consumer are not unchanging and they can often change rapidly. Unfortunately for borrowers, the collapse of their finances can occur when the loan is repaid.
If, as a result of illness, sudden expenses, job loss and other sudden events, you will not be able to continue paying the loan installments in the current amount. Then consider a specific action plan. Restricting the repayment of the loan or paying lower installments without arrangements may have serious consequences. A bank that suddenly ceases to receive fixed income from repayment of loan installments has the right to charge penalty interest. He can also start debt collection activities.
In short – it is necessary to start cooperation and talks with the bank in order to find the optimal solution for both sides.
Extension of the cash loan repayment period
One of such solutions may be the extension of the cash loan repayment period. This service consists of adding additional months to pay the liability, which directly affects the most important parameter – the monthly installment. The amount of the monthly loan installment is calculated on the basis not only of the total loan amount, included costs (commission, interest, interest), taxes and duration of the loan.
Extending the duration of the loan may therefore involve negotiating a lower monthly loan installment. A lower installment may mean for the consumer in a worse financial situation a chance to continue paying off the existing loan on more favorable terms. For the bank, in turn, this is a collateral – the customer declares that he will continue to pay the liability despite the worse situation than the one he presented when submitting the loan application.
What are the negative effects of extending the cash loan repayment period?
The above-mentioned characteristics of the extension of the cash loan repayment period do not mean that this service brings only benefits. A side effect of extending the duration of the loan is the increase in its interest costs. Although the installment decreases, the total amount to be paid back by the consumer after the end of the loan period is longer than if he had repaid the loan according to the original arrangements.
In addition, the bank may also charge other costs associated with extending the repayment period.
- Preparation of an additional annex to the loan agreement, which sets out the rules for extending the repayment deadline and thus – changing the parameters following it.
- Some banks also add a commission on the debt balance. This is the loan amount that is outstanding when you apply for the repayment period to be extended.
Credit holidays – an alternative to extending the repayment deadline
Credit holidays can be a valuable alternative to extending the repayment deadline. This is a solution for those who anticipate a worsening of the financial situation for a long time, which will result in the inability to pay back the loan on current terms. The credit vacation service consists of a temporary deferral of payment of the commitment. After their expiration, the bank may offer the consumer to continue repayment of the loan as previously agreed or to extend the repayment date. The second option will obviously mean additional costs, but also potentially lower commitment installments.
In their offers, banks have the option of using credit holidays or extending the repayment period for a simple reason. It is in the interest of the banking institution to provide the consumer with solutions in case of random events, so as to avoid the situation of a total loss of proceeds from granted loans. For the consumer, in turn, this chance to avoid, for example, falling into debt.