Managing your loan during COVID-19
If you are experiencing financial hardship through job loss, a reduction in work hours, or business disruption, then you are not alone. An increasing number of Australians are struggling to balance their books as a result of COVID-19, and in many cases are looking for ways they can continue to pay the bills.
Financial relief strategies
In this difficult time lenders have responded by announcing financial relief strategies. In an official Australian Banking Association (ABA) statement, CEO Anna Bligh said, “Banks stand ready to support customers and if anyone is in need of assistance, they shouldn’t wait but come forward as soon as possible”. Most lenders have announced similar assistance options. These may include waiving fees on early term deposit withdrawals, interest rate reductions on certain loans, particularly fixed rate home loans and options to defer or restructure home loan repayments for up to 6 months. As your broker I stand prepared to assist you with my knowledge and experience and to help you determine what may be your best option to manage your individual situation or problem.
Australian Banking Association CEO, Anna Bligh
Be Proactive
In situations such as these it is important to actively manage your situation and to act before you run into a repayment problem. Borrowers who contact their lender in advance will receive a much better hearing, and more solution options compared with borrowers whose loans are already in arrears. Banks have also made it clear that borrowers who receive prior permission to defer their loan repayments due to COVID-19 financial impact will not receive a black mark on their credit file. This discretion will not be extended to those who just simply fail to make their minimum repayments. Important: even though you may be thousands of dollars ahead in your loan repayments, that does not absolve you from the obligation to make your loan repayment each month.
Impact on Credit Policies
We are now seeing many lenders change their credit policies to adapt to the changing economic environment: • Borrowers in the most severely impacted industries: tourism, hospitality and the arts are being required to show current information about their incomes
Reductions in maximum lending ratios
Less preparedness to rely upon casual, bonus and rental incomes
Tighter restrictions on cash out or equity release lending
On the positive side we are seeing a more pragmatic approach to customer identification processes by lenders with many now accepting controlled online verification methods.
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Disclaimer: This article is intended to provide general news and information only. While every care has been taken to ensure the accuracy of the information it contains, neither Loanscape nor its employees can be held liable for any inaccuracies, errors or omission. All information is current as at publication release and the publisher takes no responsibility for any factors that may change thereafter. Readers are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.
Loanscape has today released its Borrowing Capacity Index for Q2/2024. It shows that the borrowing capacities of Australian individuals and families have stabilised after the sharp decline over the past 2 years. Lower income borrowers continue to be disproportionately impacted by interest rate increases: the family income required to qualify for the average size loan in Australia is 35% higher than 2 years ago.