Next Steps For Loan Repayment Deferrals
Banks are offering options to customers financially affected by Covid-19. Customers may be eligible for a new loan deferral for up to six months or an extension to their current loan deferral.
There are several options available to customers, depending on their circumstances. Options may include customers restarting their loan repayments, moving to interest-only repayments, or extending the term of the loan. Further options include applying for a loan repayment deferral or seeking an extension to an existing loan deferral. New and extended loan deferrals will expire on 31 March 2021.
“Banks are already having conversations with customers who have deferred their loans to discuss what’s best for them as the six-month deferral period ends,” says New Zealand Bankers’ Association chief executive Roger Beaumont.
“Customers who can resume loan repayments should do so. Many customers have already restarted payments on deferred loans. That shows they understand the benefits of getting back on track if they can.
“Any new or extended loan deferrals will not be automatic. They will be available to customers in genuine need for a period up to 31 March. Affected customers may need less time than that to get back to normal repayments.”
Since 26 March, when New Zealand first went into lockdown, banks have deferred all repayments on consumer loans totalling around $21 billion for over 61,000 customers. That represents 7% of total consumer lending. Nearly a quarter of those customers have restarted their loan repayments. Banks have also deferred business loans totalling over $1.2 billion for over 3000 customers. That represents 0.6% of total business lending. Over half of those customers have resumed normal loan repayments.
The ability to apply for or extend loan deferrals in some cases has been negotiated with the support of the government, the Reserve Bank, and credit reporting agencies.
“We are grateful for government and Reserve Bank assistance to help banks to continue to support customers in need. It’s a stressful time for some customers who have been financially affected by the pandemic.
“This arrangement usefully provides a phased approach to customers entering and coming off loan deferrals, and helps to meet customer needs on a case by case basis.”
In line with the previous arrangement with credit reporting agencies, anyone who enters or extends a loan deferral will not have their credit rating affected because of the deferral. This only applies to customers who were up to date with their repayments before requesting a deferral.
Other ways banks can help include:
- Reducing or suspending principal payments on loans and temporarily moving to interest-only repayments
- Helping with restructuring loans, for example extending the term of the loan
- Consolidating loans to help make repayments more manageable
- Providing access to short-term funding
- Referring individual customers to budgeting services.
Due to the high number of calls to contact centres at this time, customers are encouraged check their bank’s website for information on how to access assistance in the first instance. Please be patient if calling your bank.