The dangers of home loan holidays

FSCL says it is not just the unpaid interest that gets added to the principal.

The term of the loan is extended as well and that incurs still more interest costs for every month of additional time, thus total payments end up higher.  

“We are seeing cases where borrowers don’t understand that deferring payments extends the term of loan, meaning that they will end up paying more interest over the life of the loan,” explains FSCL chief executive Susan Taylor.

She adds it is important for borrowers to speak to their lender early if they are experiencing hardship and to make sure they understand the implications of changing the terms of a loan.