Before entering into a loan commitment for several years, many people are accompanied by the fear of being unable to repay the loan installments. The risk is real, but it turns out that it can be minimized. What is a grace period and why is it also called “credit vacation”?
The decision to take a mortgage is very binding,
This is why some people treat it almost as much as making a decision to marry or have a child. Because with financial matters it is sometimes like raising children: small credit – little trouble, big credit – big trouble. The long-term commitment entered into with the purchase of an apartment becomes a problem when the borrower loses his job and, as a consequence, financial liquidity.
There can be many more reasons for the problems. As is well known – life likes to surprise, so many difficulties cannot be predicted.
In order not to live in constant fear of what tomorrow will bring, it is worth learning a solution that many people have never even heard of. It is the grace period that allows you to sleep peacefully.
What is the grace period for loan repayment?
When financial problems arise, consult a financial expert as soon as possible or go to the bank immediately. The institution also wants to find the best solution, because collecting debt through external companies is a troublesome occupation. Delaying the conversation with the lender’s representative is often associated with the decision to cover mortgage installments with loans and payday loans. However, it is like adding oil to a fire.
Collecting savings that will cover the amount of liabilities for a minimum of three months during a possible home budget crisis is a generally recommended solution. However, when this is not possible, the grace period allows you to temporarily suspend the repayment of a long-term liability without the risk of a spiral of debt.
Some banks offer suspension for up to 60 months, but these are individual cases. As a rule, this is a shorter period – from several to several months. However, the bank is not obliged to offer a loan repayment grace period. Some institutions do not use such a solution, so before signing a loan agreement, it is worth checking whether a given bank can be allowed for a grace period.
At what point should you decide to extend the loan repayment period?
It also happens that customers consciously choose the “credit holidays” option. A moment of breath is not only for people who are struggling with financial problems. This usually applies to shorter grace periods. Spreading the repayment over a longer period is associated with an increase in the interest amount. The capital base, however, does not change, so the grace period is a good idea when the interesting part is already largely repaid.
In the case of mortgage banks, banks always offer a solution in the form of decreasing installments. The first repayment period is the most intensive, and each subsequent year is associated with servicing the bank’s receivables. This is a good option because people who are full of strength decide to take out a mortgage.
Youth goes hand in hand with flexibility in the labor market, so in case of problems with repayment – it is easier to find another job. Then leaving the grace period “for a rainy day” with a loan with decreasing installments is another situation when this option can be a godsend from oppression.