With the world in chaos right now, people are being told to stay indoors by their government, and with businesses also closed down, many people have been made redundant or temporarily furloughed from their job, and as such, are stressed about their finances.
For anyone with a personal loan, there is a loan deferment option to help you during times like this.
Deferring a personal loan means that you are freezing your repayments for a temporary short period of time. It does not get rid of the repayments altogether, it just delays them.
Furthermore, agreeing a loan deferment with your loan provider means you are not technically missing any repayments. This is highly significant when it comes to your credit rating, as missed payments without an agreement would negatively affect your credit score, but with a loan deferment in place, your credit score is not affected.
The other benefit is that missed payments usually incur fees and late charges, but with a loan deferment agreed, these fees are usually waived.
The Financial Conduct Authority has stated that all providers of loans must offer up to 3 months of deferment. This of course includes any logbook loans provider.
The potential downside to loan deferment is that even though the loan repayments have stopped, the interest on the loan usually carries on.
For example let us say that you have a 12 month loan but you have now deferred the repayments for 3 months, so now the loan period has been extended to 15 months, so the interest also carries on for 15 months, which means you are now paying the interest on a 15 month loan even though the principle loan and amount of repayments has stayed the same.
A loan deferment eases the immediate financial burden of the present time but because of the added interest it increases the overall cost of the loan.
Speak to your lender and see if a loan deferment is right for you.
Financial Conduct Authority consumer information