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CreditSmart Media Release
20 August 2020

Australians impacted by COVID-19 may be able to access a further four-month payment pause or deferral on their loan repayments from their lenders to help them get back on track – but that will not be automatic and consumers need to consider their options carefully, says consumer education website, CreditSmart.

Of the extension, Mike Laing, CEO of ARCA, said that consumers need to be aware that an extension of up to four months may be available, but will not be automatic.

“The additional pause period is still only a temporary measure and it will be reserved for those customers that really cannot afford to make repayments right now, but have a reasonable chance of doing so if given additional time”

“At the end of the current and any future payment deferral or any other form of assistance received, if you continue to be severely financially impacted and are unable to make your normal repayments, keep in contact with your lender so you can together determine the best long-term solution for your own circumstances.

“This additional allowance for customers to defer repayments for up to a further four months will be granted on a case by case basis depending on the individual circumstances. If not done already, lenders will contact their customers to discuss the options that might be available to them to get back on track. As well as extending the payment pause period, some options that might be available, depending on your lender, include extending the term of the loan, converting to interest only payments for a period of time or a combination of these and other hardship assistance measures,” added Mr Laing.

“It’s important for consumers to be aware of what a payment pause means in the long term. Payment pauses are temporary, and they may not be the best option for everyone given the overall amount owed will likely increase because of the pause. Customers will need to talk to their lender about how to get back on top of repayments – including how to pay off any repayments that were paused during the COVID-19 assistance.”

Impact on credit reports

CreditSmart is seeking to help consumers understand the impact of COVID-19 relief on credit reports and has released a new infographic showing how the form of assistance and consumer choices impact credit reports.paymentpause kim3

“Your credit report includes your repayment history information which is a 24-month view of whether you pay your loan and credit accounts on time. If you have been granted COVID-19 assistance from your lender, a payment pause / deferral will usually not be reported as a late or missed payment in your credit report. Instead, repayment history during the pause period will usually be reported as “up to date” or will be blank, often depending on whether you were up to date with repayments at the start of the payment pause or were already in arrears.” said Mr Laing.

“At the end of a payment pause, your repayment history might be reported differently depending on the how you and your lender intend to get you back on track with repayments. For example, if you agree to restructure your loan at the end of the payment pause period, your repayment history will essentially re-start and be reported as ‘up to date,’ with future repayment history reported against the new payment obligations of your restructured loan.

Credit score and access to future credit

Seeking assistance from your lender because of COVID-19 will not exclude you from applying for credit in the future.

“No matter how the assistance is reflected in your credit report, lenders don’t just look at the information in your credit report when they assess loan applications. They consider other factors such as your income, expenses, and employment status. These things aren’t in your credit report and they aren’t factored into the credit scores provided on those credit score websites,” he added.  

Digital Agency: Spark Green

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