Life is full of uncertainties. If your financial circumstances have changed and you find yourself struggling with your loan or credit card repayments, you may be eligible for a debt moratorium.
A debt moratorium, also known as a payment holiday or payment deferral, is an informal arrangement with your creditor to put your repayments on hold for a specific period of time and a specific reason. Your creditor will give you time (usually between 3 to 12 months) to get back on your feet or to put other arrangements in place, rather than risk you defaulting or not paying back the debt at all and them then selling it to a debt collection agency.
There are many different reasons to be suffering from debt stress. Sometimes all it takes is a single unexpected and unplanned emergency, such as injury, ill health, or a job loss, to put you behind on your loan or credit card repayments. Once you miss a couple of payments you can struggle to catch up as interest rates and penalty fees build, which then increases the amount you owe and the stress you’re feeling.
Maybe, a little bit of time is all you need to receive an insurance pay out or to get a new job. You may even be expecting an inheritance in a couple of months or waiting for the proceeds from a recent property sale, which you will use to get back on top of your loan repayments.
A debt moratorium is a short-term arrangement to put your repayments on hold for up to 12 months, taking some financial pressure off and giving you time to get back in control of your finances.
While the balance of your loans and cards doesn’t go anywhere, and in some instances, may increase through interest charges, a debt moratorium will buy you enough time to get back in control of your finances. Once you’re back in control and your money situation has improved, you can then restart repaying the debt.
It might be that you just need time to adjust your budget and cut some costs so you can continue to keep meeting your regular repayments. Alternatively, the payment holiday can provide relief from your debts for a set period of time while you can relax and let Fix Bad Credit’s debt experts work with you to find the best long-term debt solutions tailored to your individual financial situation, putting you back in control of your finances and on track for your financial freedom.
When you work with Fix Bad Credit to arrange a debt moratorium, we do all the heavy lifting. Fix Bad Credit will negotiate on your behalf with your creditors to put a pause on your repayments for both secured debts, such as your home loan, and unsecured debts, such as credit cards and personal loans.
Depending on the agreement negotiated, a moratorium on your debts may freeze interest for the period of the moratorium, or interest and/or charges may still incur, however, you will not have to make any repayments whilst the moratorium is in place. Another option can be that you just pay interest over the holiday period, substantially reducing the size of the repayments to a level that you find more manageable, while the extra money goes towards other essential costs.
What are the types of debt moratorium arrangements?
The types of debt moratorium arrangements available include: A full repayment pause where you stop making any repayments (principal and interest) for an agreed-upon period of time. Partial repayment pause where you reduce your repayment amount to the requested amount i.e. you make 50% of your usual repayment. Interest-only repayments for the period.
While the debt moratorium is in place, Fix Bad Credit can negotiate on your behalf with your creditor to establish a new debt repayment plan with payments that are more manageable and affordable. These debt solution options might include:
- Debt settlement
- Debt consolidation
- Home loan refinance
- An informal agreement
- A formal agreement
- A combination of these and other solutions.
What are the advantages of a debt moratorium?
- Provides you with breathing space from your debts
- Provides some mental relief and stops the aggressive phone calls from debt collectors.
- Puts your debt repayments on hold
- Allows you time to explore your options
- Enables you to get your finances back on track.
What are the disadvantages of a debt moratorium?
- Depending on the arrangement, it may extend the length of your loan or your repayments may increase once the debt moratorium period ends
- You may pay more in interest over the life of the loan
- It may be recorded on your credit report under the repayment history information (RHI).
For more information on whether a debt moratorium may be for you call one of Fix Bad Credit’s debt experts on 1300 729 757. Our debt experts can help you assess your financial situation for free and identify debt solution options tailored for your specific personal financial circumstances, using their in-depth knowledge of credit law and debt processes. Debt is one of the few stressors in life that doesn’t go away. The worry is always there, along with the feeling that there is nothing that can be done about it.
Money and debt worries cause heavy emotional and mental burdens, affecting your health, your work, and your relationships. But just know you’re not alone. If you’re feeling overwhelmed by money matters, at Fix Bad Credit, we’re here to help you find relief from your debt stress. Talking about debt can be daunting. It’s hard to know where to start or what your options are. However, you can take a small step right now by picking up the phone.
Geoff, aged 36 from Queensland’s Gold Coast, had just left a secure job to start a new company working for himself as a builder. Unfortunately, only two months after starting his new company, Geoff had an work place accident, tripping over a pile of bricks and breaking his leg meaning he couldn’t work for 6 months. Although the accident was found not to be his fault it was going to take at least 6 months before he received a compensation payout for the accident.
Geoff had just taken out a substantial business loan to buy the tools and vehicle he needed for his new business and hadn’t had time to build up enough emergency savings to cover the cost of his repayments for the period he was unable to work. Fix Bad Credit was able to negotiate a debt moratorium with Geoff’s bank for his business loan, meaning they froze all Geoff’s repayments for 9 months. This meant Geoff was able to rest easy, knowing that once he received his compensation payout he could afford to pay back those repayments and get back to the job he loved.
Frequently Asked Questions
- Can I really become debt free?Our experienced team have been helping Australians get out of debt for over 10 years. No matter your unique situation, we have a solution to help you achieve a debt free life.
- How is my credit score calculated?The three major Credit Reporting Agencies in Australia – Equifax, Experian and Illion, use their own complicated algorithm, or calculation, to calculate your credit score, based on the information in your credit report at the time of calculation. Both your negative and positive credit-based behaviours are included in the calculation.