‘Have a conversation with your lender’: What to do when the bank wants its money
Restarting debt repayments after COVID-19 deferrals will be tough for many households but borrowers have some options. These are strategies you need to know.
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Restarting debt repayments after COVID-19 deferrals will be tough for many households as the pandemic cuts jobs and government welfare gets wound back this month, but borrowers have options.
Regulator data shows 9 per cent of Australia’s home loans were deferred at the start of August, but Mortgage Choice CEO Susan Mitchell says some borrowers have started resuming repayments.
Banks are contacting customers to check if they are able to repay, and Mitchell says people should not try to avoid the inevitable.
“You will need to resume repayments at some point,” she says.
“If you’re still facing financial adversity, it’s best to have a conversation with your lender about your options sooner rather than later. Be honest about your financial position and ability to repay.”
Some borrowers are receiving four-month extensions, but asking for this just for the sake of it will end up costing you more money over time.
“Understand how much interest has accrued on your loan – this information can be found on your latest loan statement,” Mitchell says.
Aussie CEO James Symond says many of its customers have come off deferrals early “but of course there are many who will need support from their lender to manage through their individual circumstances”.
“Talk openly with your lender and or broker and ask them to explain all available options to you,” Symond says.
These options may include extending the repayment deferral period, switching to interest only payments or using a redraw facility if possible, he says.
“Also, fixed rates have never been lower so it’s a good time to chat to your lender or broker about the options available to you.”
Mitchell says borrowers can also try to negotiate a lower interest rate, which will cut their repayment costs.
“Don’t assume that just because you’re on a deferral that you can’t ask for a better rate,” she says.
“Demonstrate what you’ve done to adjust your lifestyle and cut back on your spending while you’ve been on deferral. If you can demonstrate that you’ve created a budget plan, your lender will be more likely to work with you to find an outcome.”
Originally published as ‘Have a conversation with your lender’: What to do when the bank wants its money