Member banks of the Australian Banking Association (ABA) announced they would offer assistance to those suffering from COVID-19. The ABA has 22 members in Australia, including the big four.
This relief will vary, depending on your circumstances, but could include:
- deferring your loan payments up to six months;
- waiving fees;
- implementing interest-free periods or no interest rate increases;
- offering debt consolidation to help make repayments more manageable.
Depending on your bank, you may or may not be able to access a redraw facility during this time (i.e. access extra repayments you’ve made on your loan).
Your interest may also be capitalised, which means that all interest on your paused repayments will be added to your loan balance. For example, if you typically pay $1,000 in interest on your loan each month and pause your repayments for six months, $6,000 would be added to your loan.
Once your pause ends, you’ll also need to make up for these missed repayments over an agreed period. At this point, your lender will recalculate your loan balance and your loan term may be extended. Your repayment amount will either stay the same or be adjusted accordingly.
Keep in mind that due to this, you may pay more in interest over the life of your loan.
Finally, any Australian granted a six-month deferral on mortgage repayments will not have their credit rating affected – as long as they were up-to-date with repayments prior to COVID-19.
Last updated: 12/05/2020