When that’s all over what will your credit score be?
This is welcome news, but a payback “vacation” will still cost you more money. This is true even if you have your mortgage with Commonwealth Bank, which has taken the admirable step of depositing a small amount of money into such mortgage accounts in order to prevent customers from paying interest on interest.
As you extend your repayment term, your interest payable will go up unless you make additional repayments at the end of the COVID madness.
Best strategy: A good option – if you can handle it – is either to negotiate a discount rate or to refinance into a better mortgage business. There are now high quality loans on the market with interest rates that start in the “middle of the second year”.
Moving a $ 400,000 loan from a non-discounted rate of 4.5 percent to a market-leading 2.5 percent cuts your monthly repayments by more than $ 400. You can also see if the bank is temporarily reducing your repayments to interest only to save. Find more here: https://www.paydaychampion.com/no-credit-check-loans/
Credit cards and loans
The same waiver graciously applies to reporting all of your debts and loan repayments.
Banks are canceling or suspending minimum credit card repayments altogether.
However, much like you do with mortgages, if you roll up the interest on the debt – especially the inflated credit card interest rates – it will end up costing you much more.
Best strategy: The smart solution is to see if you can get a zero percent balance transfer deal on your credit card so that your debt at least rests while the economy does.
It is not all smooth for the debt settlement “vacation”.
Missing payments on other bills like utilities and telecommunications companies can get you in trouble.
Equifax says that unlike banking products, the monthly repayment history for such bills is not included in credit reports. (It is important that your rental history is not currently shown in credit reports either.)
However, the Financial Rights Center has urged these industries to “guarantee” that there will be no credit breach if they indulge.
Best strategy: Finder, who works with credit bureau Experian to offer a free credit check, says you can call your provider’s finance department if you likely can’t pay.
You should also be wondering how your repayment history is reported from that point forward – and request that it not be listed as an overdue payment or a late payment.
Nicole Pedersen-McKinnon is the author of How to get mortgage-free like me. Follow Nicole on Facebook, Twitter, or Instagram.