Credit holidays are not always favorable!

In the era of the COVID-19 pandemic, and as a result of the economic crisis and the labor market, often resulting in loss or reduction of income, many borrowers faced problems with ongoing servicing of monthly obligations, especially credit. For a bank, unpaid credit is also a real problem, so it’s hardly surprising that credit institutions have met this problem by offering credit holidays. However, this term does not always mean the same thing, and certainly does not result in a partial cancellation of the loan. Even worse, credit holidays, like any other, can simply cost.

Finding out whether it is worth applying for a credit vacation and what it will mean in practice is hindered by the fact that banks use not only a variety of names for credit holidays (starting from the holidays themselves, suspension or postponement of installments, extension to grace), but also different rules. Some lenders also give the customer the option to choose between, for example, two credit vacation options.

What in one bank is called suspension of repayment of installments and results in the fact that for a period of 3-6 months, the borrower will not have to pay the bank a zloty for servicing the loan, in another institution it can only mean obtaining a grace period in paying the installment. In the latter case, the borrower must continue to remember to pay the interest portion of the installment, which can (except for low-interest loans) a significant part of the installment.

In addition, it is not always the case that the effect of a 3- or 6-month suspension period will be to extend the loan period, e.g. from 300 months (25 years) to 306 months. For some loans (e.g. those with a decreasing installment), banks anticipate, instead of just such a prolongation, the distribution of unpaid installments to all the remaining ones until the end of the contract (without changing the final date of repayment). The latter solution is unfavorable because it leads to an increase in installments falling after the credit vacation period.

Therefore, it is not the name but the content of the application that is important, followed by an annex or agreement to the loan agreement regarding suspension of installment repayment (i.e. so-called loan holidays).

Loan agreements sometimes contain their own provisions regarding credit holidays, e.g. by granting the borrower the right to take advantage of such a privilege once during the entire loan period or even more often (e.g. once within 2 years). Such a privilege is also used by credit institutions to promote their own products and services.

The credit holidays provided for in the loan agreement are independent of the currently used – in accordance with the recommendations of the Polish Bank Association – suspensions. The borrower is in such a comfortable situation that he can choose between a loan vacation guaranteed by the contract (in which case the bank is obliged to implement it) and those that have been made available to a broader group of payers in relation to the current epidemiological situation, in which the bank may, but does not have to agree to postpone installments. What’s more, the terms of these two grace periods for loan repayment may be different, so before deciding to submit an application, it is worth considering what will be best in a given situation.

In most banks, they have a flexible approach to loan holiday applications – they do not require any detailed justification or, what is more, attach documents confirming a decrease in income. For ease of reference, banks have provided templates of applications for suspension of installment repayment on their websites. It is also possible to submit such an application without leaving your home after logging in to the transaction service and finding the option to submit an application for a credit vacation. In the case of the latter method, you can also count on the conclusion of an annex to the loan agreement electronically.

When submitting the application – regardless of how – you should make sure whether the bank makes the entry into force of credit holidays conditional on the conclusion of an annex, or whether the suspension of installments is somehow automatic at the time of submission of the application, while the annex has only the grace value . It may also be that if there are several days left until the next installment payment date, the application will apply only to the next installment due next month and the next. Because banks usually stipulate a written form for their changes in the agreements, submitting the application for suspension of installments and even its system confirmation (e.g. in the form of an SMS from the bank) do not yet constitute a significant extension of the loan repayment period.

In the first phase of the coronavirus epidemic, some banks began to use templates of applications and annexes on deferred payment of installments, which raised concerns among borrowers repaying loans indexed or denominated in foreign currency (especially in the Swiss franc). These were provisions confirming the amount of the loan balance or obliging them to pay installments on time after the grace period. There was a risk that such provisions could be later – i.e. in a dispute with the bank seeking to obtain a refund of the overpayment, annulment of the contract or recognition of the loan as PLN – used by the lender as one of the arguments in defense of such claims.

As a result of complaints received by the Office of Competition and Consumer Protection, its President initiated in April this year. an investigation in which it checks the conditions under which financial institutions offer borrowers a deferred payment. As a result, banks began to withdraw the conditions of credit holidays that are unsafe for consumers.

The conclusion of an annex regarding credit holidays does not constitute acceptance of the debt in the amount specified by the lender, nor is it relevant for consumers seeking claims arising from the contract.

The first three anti-crisis shields did not provide for credit holidays at the borrower’s request. Until now, installments were postponed at the borrower’s request and with the bank’s consent, which, however, does not always take place. Sometimes it was enough for the negative decision not to pay the installment from the period before the pandemic.

Only shield 4.0 brings a statutory solution thanks to which borrowers who after March 13 this year. they have lost their job or other main source of income, they will be able to inform the bank about their decision to use the suspension for up to 3 months of the full loan installment (principal and interest). It is sufficient in addition that the loan was granted before March 13, 2020, and its repayment date falls after September 13, 2020, for the bank to be forced to implement such a credit vacation at the borrower’s request.

Example: One of the banks gives its clients a choice in the form of applying for:

– extension (suspension of repayment of principal and interest installments) for a period of 3 months with simultaneous extension of the loan period for the same period for which the extension was granted,
– grace period (suspension of capital repayment) for a period of 3 months with a simultaneous extension of the loan period for the same period as the grace period.

author: Tomasz Konieczny
Gazeta Podatkowa No. 51 (1717) of 2020-06-25

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