Should I Pause My Repayments?

Hi Scott,

I haven’t lost my job due to the coronavirus (I have a stable public service job), but I’ve seen an option from my bank to freeze my home loan repayments. Would it be a good idea to build up a bit of extra cash in this uncertain climate?

Adrian

Hi Adrian,

You’re right, banks and other lenders are offering their affected customers the ability to stop making home loan repayments for up to six months. I’ve seen some people describe it as a ‘pause’ or a ‘repayment holiday’.  It is neither. It is the financial equivalent of being stuck in a taxi while in a traffic jam: You’re not going anywhere, but the meter’s still running.

The interest on your debts, and the fees and the charges, are all still ticking over.  Tick, tick, tick. Understand this: your debt is growing higher each and every day you delay.

My thoughts?

Now is not the time for you to forget about where you’re going, suck your thumb, and look aimlessly out the window. Instead, it’s time to focus relentlessly on your final destination: getting the banker off your back and becoming debt free!

So, if you’re still employed, you should consider making extra repayments.

Here’s why: As a result of this crisis, the Reserve Bank has slashed interest rates to the lowest level in history. Even better, they’ve said that they could stay at these ‘emergency levels’ for the next three years. In other words, this is an amazing opportunity for you to smash a huge amount of debt over the next few years.

Just remember that when it comes to the banks there’s no free ride, mate!

Scott