23 Jan Is a Payment Holiday a Good Idea?
With the price of day to day items skyrocketing, more and more consumers feel overwhelmed by their financial obligations and debt. To make it worse, South Africa’s rise in interest rates has meant that many individuals are struggling to afford their debt repayments and home loans. It is normal to experience anxiety over debt repayments that feel increasingly unmanageable. We live in a world that relies heavily on our ability to make enough money, keep up with continuous inflation and not fall behind on our bills or debts.
Some individuals facing financial strain may wonder if a payment holiday is a good idea, and we break this down for you here. At Debtco Group, we advise our clients to consider Debt Review as the better alternative to a payment holiday in most instances. We offer a National Credit Regulator (NCR) approved Debt Counselling service that has proven highly successful to many individuals with debt problems.
What exactly is a payment holiday?
A payment holiday essentially gives you a short break from your responsibility to repay debt to a creditor, for a timeframe of about 1 to 3 months. In order to qualify for a payment holiday, you need to request it from your lender directly, and if you’ve been consistently struggling to repay what you owe, it is unlikely that a payment holiday request will be approved. Payment holidays are not granted for just any reason, but can help in instances where a consumer is retrenched, has to suddenly afford a big and unexpected expense, or simply needs to land back on their feet after financial hardships.
Is a payment holiday a good idea?
While you will feel immediate relief in your finances for this period of time, it will catch up to you pretty quickly once the payment holiday ends. Most individuals find that their budget is much tighter than before, once the payment holiday ends and their faced with more to pay back than before. Once you resume payments, you may have to pay back more interest and you could be paying back what you owe over a longer period of time. You also have to factor in admin costs associated with your payment holiday.
We advise clients to carefully read through the terms and conditions of any payment holiday agreement, as there are often downfalls that can be overlooked. While taking a payment holiday is preferable to defaulting on payments entirely and neglecting your financial obligations, there are other debt relief measures available that may be better suited to struggling consumers.
Instead of the payment holiday route, we recommend that struggling consumers get in touch with us regarding our Debt Counselling service. Rather than only experience short-lived relief, Debt Counselling gives you the chance to pay back less towards your debt every month, so that your budget is much more forgiving.