Payment Holidays on Your Loan: How They Work and What They Really Cost
With the repo rate up again and household budgets stretched, many South Africans are asking their lenders for a payment holiday, a short break from loan repayments. It can ease pressure, but it is not free: interest keeps building while you pause, so the total you owe grows. Lenders usually grant these breaks for one to three months, and mostly only to people who can show their hardship is temporary. The table below explains how a payment holiday works and what to try first, and you can compare NCR-registered lenders on saloansonline.co.za if you need to refinance.
| Question | Answer |
|---|---|
| What is a payment holiday? | An agreement with your lender to pause or reduce repayments for a set period |
| Does interest stop? | No. Interest, and possibly fees, keep building and are added to your balance. |
| How long does it last? | Usually about one to three months. The longer the break or the higher the interest rate, the higher the extra cost. |
| Will it hurt my credit score? | Not if it is agreed with your lender and reported correctly. Skipping instalments afterwards can damage your score. |
| Who qualifies? | Anyone can ask, but lenders usually want proof of financial hardship that is temporary |
| Types of break | You can delay the next instalment date, or extend the loan term so you repay over a longer period |
| Alternatives to try first | Ask for a loan term extension, which can keep repayments roughly the same. Use an overdraft only if its costs are lower than the payment holiday. Check whether credit life insurance on your loan can help. |
| Where relief is greatest | Usually on a home loan, which has the longest term |
Before you agree
- Ask your lender for a detailed repayment schedule showing the total cost and your new monthly instalment.
- Make sure the arrangement is in writing and ask how it will be reported to the credit bureaus.
- If you cannot keep up after the break, speak to a registered debt counsellor.
Terms differ between lenders. This article is for information only and is not financial advice.
Sources
- The real cost of payment holidays in South Africa (DebtBusters)
- Are payment holidays a wise idea? (JustMoney)
- Payment holidays and your credit report (Experian South Africa)
- Claim on your credit life cover instead of a payment holiday (HeraldLIVE)