What happens to your bank loan during the pandemic?

The Australian Securities and Investments Commission's guidelines

If you deferred your home loan repayments due to the impacts of COVID-19, find out more about what that means for you. Source: Pixabay

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A finance broker shares what you need to know about your bank loan during these financially difficult times.

Highlights

Banks can grant bank deferrals and extensions to select individuals.
Be proactive about knowing the status of your loan at this time.
You have the option of restructuring your loan.

The pandemic has brought about financial stress to many, with a good number needing assistance and extensions for their loans and debts.

Senior Finance Broker Maria Papa shares critical information regarding bank loans during this crisis.

1. Loan deferrals are good for six months.

Loan deferrals are good for six months. Source: Nattanan Kanchanaprat from Pixabay

According to Ms Papa, loan deferrals are valid for six months, beginning April 1 and ending September 30.

"Banks cooperated with the government to give reprieve to those who need it."

2. Loan extensions can be given, but only for select individuals.

Loan extensions can be given, but only for select individuals. Source: bertholdbrodersen from Pixabay

While loan deferrals are only meant to last six months, banks are aware that there are sectors in the economy that are more badly hit than others.

"You can potentially extend your loan for another four months," she shares, adding, "But these are only for those who really can't make payments on their mortgages and the like."

Ms Papa says that banks will ask about a client's finances and how they plan on improving their current situation before approval.

"They're a lot stricter now. They'll ask about your industry, why you're out of a job, what you're doing about finding work or upskilling, etc."

"At the end of the day, remember though that even with the extension, you're still going to have to make repayments. There's no going around that."

3. If you want to feel at ease about your loan, call your bank.

If you want to feel at ease about your loan, call your bank. Source: StartupStockPhotos from Pixabay

Ms Papa shares that banks will start calling customers about their current loans under the bank loan deferral scheme. However, she recommends being proactive and calling if you feel uneasy about your loan.

4. You have the option of restructuring your loan.

You have the option of restructuring your loan. Source: Tumisu from Pixabay

Aside from requesting for an extension, clients can ask that their loans be restructured.

"For example, you have a 30-year loan, you can restructure it so that it rewinds back to 30 years again. You can ask if that's possible. You can even ask if you can for the interest first if paying both the principal and interest is too much."

"Banks can help you find ways to help you get through this."

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