Payment breaks, installment suspensions, buy now – only start paying in installments in three months: some online credit banks contractually provide installment breaks but are rather reluctant to make such announcements.
Different mail-order companies, some online dealers and also car dealers. They often aggressively promote loan-financed purchases with rate suspensions, thereby attracting customers and increasing their sales.
After all, the offer to buy your dream car now and start paying the installments three months later seems to be really cheap at first glance. We would like to explain briefly what rate suspensions actually are, what options for payment breaks exist and how to find a cheap online loan with payment breaks.
Then we look at the question of what are the advantages and disadvantages of such loan offers and when is it advisable to take payment breaks.
What are the rate suspensions?
A break in payment is the temporary suspension of the contractual obligation of the borrower to pay the lender.
The installment break is always based on a contractual agreement. The lender cannot simply suspend installments. Three different forms of a payment break are common:
- The installment payments only start sometime after the conclusion of the loan contract. The loan amount is therefore paid out before the consideration is paid in installments. This gives the impression that the borrower temporarily “receives something for free”. Most installments are suspended for one to three months. Such breaks in payment are common in mail order and online retail.
- Banks grant their customers rate suspensions from the outset. For example, it is contractually agreed that a monthly installment may be suspended every twelve months. Such contractual agreements regularly contain provisions on how the borrower can exercise his right to an installment break. For example, the payment break must be announced in writing or via an online form with a specific deadline.
- The bank can defer payment in installments at the request of its credit customer. Such deferral measures can be considered if the credit customer can no longer service the loan in the agreed amount. Sudden financial difficulties from unemployment are an example. Deferrals of this kind are not originally part of the loan agreement. They have to be individually negotiated afterward. Bank customers are not entitled to this.
If payment breaks have been contractually agreed from the outset, the entire rate is generally not applicable during this period i.e. both the repayment portion and the interest portion. However, this is not mandatory. Partial suspensions are quite common, especially when rescheduling measures are agreed upon.
For example, payment of the repayment portion included in the installments may be suspended for a while interest payments continue. It is also possible to simply reduce the rate over a longer period of time or even until the loan has been paid off.
In any case, taking a break from payment will result in an extension of the loan term. This also applies to a partial suspension of payments. A pause in installments has no influence on the amount of the subsequent installments.
Some banks charge processing fees for the expenses resulting from the rate suspension.
Borrowers must strictly adhere to the contractual procedure for enforcing the rate suspension. You can’t just stop payments.
In the worst case, the unannounced use of a payment break can lead to the loan being terminated. A deterioration in the credit score is always the result. It is advisable to reinsure yourself by phone before taking the break unless confirmation has been given.
Online Loans with Rate Suspend: Offers
Relatively few direct banks grant contractually fixed-rate suspensions. Often these are temporary offers that are used for advertising purposes.
The easiest way to find out which banks are currently granting breaks is to use a credit calculator. In our opinion, the best overview is provided by E-Money’s credit comparison. Set the filter to “All bank offers” and select the “Installment breaks” option under “Credit properties”.
The loan calculator then provides a large number of direct banks that allow rate breaks. These include lesser-known credit institutions, which are particularly cheap.
However, the extent to which payment breaks are granted is not specified. Credit customers must inform themselves of this directly at the bank before concluding the loan contract.
How helpful are payment breaks really?
In which life situations can a one-off suspension of payments per year be useful? Strictly speaking, it takes a long time to find case groups in which payment breaks of this kind really help. But they do exist. Payment breaks mean higher interest charges.
It should not be forgotten that the installment break ends after one month or another period agreed in the contract. After that, the contractual credit installment must be paid again.
Very short liquidity bottlenecks can be considered with the certain expectation that sufficient funds will be available to settle the installment after the installment break. Perhaps a break in payment will help with unforeseen expenses for a purchase or a car repair.
By suspending the installment, the expensive exhaustion of the overdraft facility or the short-term taking out of another loan may be averted. In some months of the year, there are many one-off costs. This can include insurance premiums, for example, if you have opted to be paid in annual premiums. It is helpful if the rate for a current loan does not have to be applied.
In such and similar cases, it is, of course, convenient to be able to claim a pause for payment without a great reason. Unfortunately, these cases are rather rare when there are problems with the repayment of a loan.