Payouts for credit life and payment holidays are on the cards. However, it will only happen to those impacted by the lockout directly and will come with Ts and Cs.

Although we look forward to more announcements from the banks, they all said that they are going to give paid vacations to those who cannot fulfill their lock-in commitments. This is most likely to be done individually.

According to Unathi Kamlana of the Reserve Bank, recent instructions were given to provide debt relief for the banking industry.

Unathi Kamlana, head of prudential administration policy and the supporting statistics and industry with the reserve bank addresses the strategy of the bank of keeping households and businesses afloat during the coronavirus lockdown with Refilwe Moloto. He defines the regulatory support areas of the bank. The Reserve Bank has recently released guidelines to alleviate the bank sector’s debt.

All financial institutions have reported that debt relief can be provided by credit insurance policies. Credit insurance plans have an income loss clause that occurs if you are pressured into unpaid leave by your employer or unable to pay because of lock-down. It also applies to you when you contract the Covid-19 virus and can’t work.

Within the provision for loss-of-income and restraint, the debt will be compensated up to 12 months or before you return – the shorter.

Standard Bank is the only bank to give small businesses with revenue of less than R20 million a full payment holiday. It extends to all corporate loans including overdrafts, credit cards, vehicle financing and mortgages. This is an annual payment holiday from 1 April 2020 until the end of June 2020. The bank would need to be aware of companies who do not plan to make a payment holiday. All student customers currently getting a Regular Bank Student Loan will, in turn, be charged a 0 per cent interest and zero fee payment holiday for the same duration.

The banks have notified consumers of the deferment or decreases in interest payments for three months. Nevertheless, in any case, the main debt will actually be attributed to the interest, fees and any insurance premiums. While this may provide cashflow relief, if possible, to people who have been truly impacted by loss of income due to lockdown.

A payment vacation is good news, but it’s possible that interest will continue to work even with payments being stopped. The short-term cash crunch is caused by the lockdown. In other words, at the end of the loan term the total payment can exceed that which was original. This does not mean that you should not take this choice into consideration when facing a cash crunch as long as you know that you can pay back a little more.

By Noni Nchwe