Consumers who have decided to take a payment holiday may find themselves in a difficult position down the line when it comes to their credit records, says Ayanda Ndimande, business development manager of Retail Credit at Sanlam.
Ndimande told Business Tech that many may be tempted to take the option of a payment holiday over this time, however, she warned that individual South Africans should be cautious with any debt relief they take.
“It’s wise to be wary and investigate all your options, especially as these could impact your credit score. If you take a payment holiday, you will still be charged interest on the balance of your loan, including your usual monthly fees.”
Solutions:
Types of payment holidays and credit records
Annelene Dippenaar, chief legal and compliance officer at Experian Africa said that local banks typically allow for two types of holidays.
One is to delay the payment date of the next instalment, the other is to extend the terms of the agreement and pay back the loan over a longer period.
“If you meet your revised obligations under the payment holiday, it should not result in a buildup of missed payments on your credit report. Your credit score will not be affected negatively because your months in arrears will remain static until the time that the delayed amount becomes due and payable.”
Dippenaar said that payment status of your accounts is important, other factors are taken into account to calculate credit scores.
These include total unsecured debt – including credit cards and personal loans – and what your total use of your credit is.
“Unfortunately, there is no guarantee that it will not impact your ability to get credit in future. Lending policies differ between the various financial service providers, so this will depend on the lender with whom you apply for credit in the future,” she said.
“The intention of the payment holiday is, however, to allow the consumer’s profile to remain static during the period of the payment holiday and that the payment holiday data submitted to and held by the credit bureau will not be a “negative event” on your credit profile”.
Why credit records are important
According to Business Tech, there are a number of ways to check your credit record. Some of the most popular options are outlined below:
https://www.sanlam.co.za/personal/financialplanning/creditprofile/Pages/default.aspx
https://www.mycreditcheck.co.za/