Credit holidays are a period of credit commitments, during which the borrower pays only the loan interest or only the principal amount of the loan without interest to the creditor, however, the first type of loan holiday is more advantageous for both the borrower and the lender, therefore it is more popular and widely used. Credit lenders are both bank and non-bank lenders, but it must be admitted that in both sectors credit holidays are also used as a marketing trick, which borrower would not be interested in paying principal or interest for some time in their credit commitments, but not all that easy – credit holidays are granted only in certain cases, which will also be discussed below.
Credit holiday function
Of course, credit holidays are not used as a marketing trick primarily – the primary credit holiday function is to reduce the borrower’s credit burden in situations where, for example, it has been out of work, there has been an increase in the family, sudden and significant income losses or other financial difficulties or problems with repayment of the loan. If the borrower has any financial problems and creditworthiness, he / she must definitely contact his or her creditor for advice and be informed of the problem situation to find the most appropriate solution. It should always be remembered that obtaining a credit holiday is in the interest of the borrower, so do not wait for the credit provider to offer you a credit vacation, but act on your own.
Apply for credit vacation
However, before applying for help and asking for a credit vacation, you need to know some of the prerequisites for granting credit holidays. The loan amount must be at least 1400 EUR to get a credit vacation . If your loan amount is greater than mentioned, and you are in an insolvency situation, you can contact your creditor and ask for a credit vacation. If you have lost your solvency as a result of losing your job, you must obtain the status of an unemployed person by registering at a branch of the State Employment Agency. Credit holidays are granted for a specific term and depend on the individual situation of the borrower.
Indeed, in the case of a serious situation where, for example, there is no job and no prospect of obtaining it in the near future, not only interest payments but also principal payments are canceled for up to 6 months. It should be noted that credit holidays can only be obtained once per calendar year. It should be emphasized that, after the credit holidays, the monthly payment of the loan increases slightly (by 0.5% to 2%) , making the total cost of the credit more expensive, so the credit holidays should be used in case of a serious need rather than for abuse, which can then be costly.
Credit holidays are an expensive and risky service
So the interest rate on these factors is slightly increased to compensate them. If, for one reason or another, you are not granted a credit vacation, it is the responsibility of the creditor to offer you another solution to ease your financial situation, such as applying a different repayment schedule or terms.