Will deferring loan repayments impact your credit rating?
One question I’ve been asked a lot recently is whether deferring business or personal loan repayments due to COVID-related hardship, will affect your credit rating.
As we know, as the world plunged into the COVID abyss last year, there was a lot of uncertainty about how the pandemic would play out, and how the finances of businesses and individuals would be impacted.
Fortunately, amid the uncertainty, the banks came to the party. In fact, one of the few shining lights from last year was that understanding from the big banks that the 3 million Australian households with mortgages, would need help.
As of July 2021, the ABA announced banks will be providing support to those affected by COVID-19 lockdowns, allowing mortgage repayments to be deferred for up to three months. This would also extend the life of your loan by the same duration at the end.
Under normal circumstances, deferring your loan repayments could affect your credit rating. Things like late payments, missed payments, defaulting on loans, or applying for too many additional credit products (like personal loans or credit cards), would have a negative impact on your credit rating.
However, in an unprecedented situation like the one we find ourselves in now, where so many people are impacted by something beyond their control, it’s likely the credit authorities will be a bit more lenient.
In fact, I’d expect that a loan repayment deferral that is supported by your bank will not affect your credit rating at all. But it would be best to discuss this with your lender to make absolutely sure this is the case.