What you need to know about deferring loan payments

We made a commitment to always help you move your financial life forward, and now is no different. In many cases, financial plans should remain on track, but in others it may be time to reassess to make the most out of your savings, debt and equity.

If you experience an interruption to your income a payment deferral is a great option for temporary relief, but it’s important to understand the long-term impact and have a plan for the end of the deferral period. Here’s what you need to know about deferring personal and business mortgage and loan payments.

What does “deferring payments” actually mean?
Deferring payments is like pressing pause, not fast forward. You don’t need to make payments for a period of time, but rather the term (length) of your loan will be extended and you make up the missed payments at the end if you’re unable to prior.

There are two kinds of deferral methods: Principal And Interest and Interest Only. Principal And Interest deferrals are also called Full Deferrals – they involve making no payments over a duration of time. Interest Only means you pay only the interest, not the principal, resulting in a lower payment amount with less impact on the interest earned (more on that below).

Can I defer payments?
If you’re a Member who is currently up to date with payments and directly impacted by a COVID-19 related layoff or work shortage you’re eligible.

When is the right time to defer my loan?
Whether or not it’s the right time depends on your unique situation; it’s important to balance your immediate needs with the long-term outcomes. In almost any circumstance, though, keep paying off your mortgage or other personal loans, or opt for Interest Only deferrals as long as you can.

Take some time to put the following on paper or into a spreadsheet:

• How much money do you have access to right now?
• What bills and expenses are you expecting?
• What money do you expect to come in?
• What other deposits or investments could you have access to?

As a starting point we recommend plotting this until the end of 2020 assuming nothing is going to change (as things change you should revisit your plan and adapt). Use this information to figure out how long you can go before having to use debt such as credit cards or a line of credit to pay your bills or cover expenses.

When you need to start using debt then it’s best to try to have your payments deferred as soon as possible. Regardless of when that is, contact your Advisor with your details and questions to ensure you have the best plan in place to effectively use your finances.

Will my credit score be impacted?
No, because of the way we defer your payments your credit score will not be impacted. If you’re deferring payments with another financial institution ask them directly as it may.

Will my payments be bigger after?
Your payments will remain the same however your amortization will be extended depending on how long you defer for.

How long can I defer my payments?
Typical deferrals are between 3-6 months. We recommend starting with 3 months and revisiting your plan with your Advisor at the 2 months mark. This will limit the additional interest you pay and also allows for more flexibility later.

How can I prepare to make payments again?
Setting some money aside in anticipation of making payments again will be a big help. If your situation has changed and you’re able to make payments without using what you’d saved you can use it to make a lump sum payment to reduce the impact of the additional interest and length of the repayments.

How do I defer payments?
We’re here to help find a solution to meet your needs. Please contact (877) 202-5722 or your Advisor directly to discuss options.

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Written by

dcampbell@copperfin.ca

Dan Campbell moved to Thunder Bay from Paris…. Ontario. As a Commercial Account Manager, Dan advises our business members in Thunder Bay, on the most effective solutions to achieve their objectives. Dan is a graduate of McMaster University, and is passionate about financial literacy. In his free time, you can find Dan outdoors hiking with his Dog Kobe or trying to keep up with his wife Rachel on the volleyball court.