Guiding consumers since 2009

Don’t use your December repayments for Christmas

By Staff Writer
Many people opt to use their bond repayments money to pay for their Christmas spending, said First National Bank home loans division (FNB). FNB cautions consumers against using their December bond repayment to fund luxuries over the festive season such as holidays, entertainment and presents.
"We find that consumers are often tempted to miss the end of year home loan repayment if they have not budgeted for the festive season spending. This is risky from both a financial and credit perspective," said Calvin Ndlovu, head of operations at FNB Home Loans.
Long term effects
Customers need to look at the long term effect of missing a bond instalment in order to fund luxuries around December.
"If you catch up on your arrears there will be no penalties imposed by the bank for late payment, but there will be accrued additional interest on the outstanding capital," said Ndlovu.
Ndlovu went on to explain that it is important to remember, for most people, there is a long stretch from the December pay check to January, which makes it difficult to catch up with the home loan repayments in that month. Rather than miss a repayment, budget properly for your Christmas spending.
Credit record
While your bank can make arrangements for the repayment of arrears, there will still be an impact on your credit record," said Ndlovu.
A default of part of or the full instalment reflects on your credit record around 20 days after default and will remain there for as long as you are in arrears.
This may impact your ability to apply and receive credit as the active payment record will remain on your credit bureau profile for a period of two years.
After a 30 day period the consequences of the missed instalment will begin to take effect.
"We find that for people who miss one repayment, it takes on average four months to catch up, and after three missed payments the bank will proceed with legal action which could ultimately put you in danger of losing your home," said Ndlovu.
Pre-pay payments
One of the ways in which to avoid the default is to pre-pay into your home loan throughout the year. By pre-paying you can build up a reserve in your bond, and if you are more than one repayment in credit, missing a repayment will have no effect.
"This is a far better and effective option than going into arrears, not only will you save on your credit record but you will also have the advantage of reducing the interest on your capital for the period that you have pre-paid," said Ndlovu.
Payment holiday
Another option for clients is to ask their bank for a payment holiday. These are normally three month long terms, in which you do not make any repayments. However, in the next six months following the holiday, you will have to pay extra to make up all the arears missed in those three months.
FNB offers two other options when it comes to payment holidays:
  • A reduced payment of 80% of repayment for a period followed by step up payments every 6 months until the arrears are cleared (maximum term of the arrangement will be 24 months).
  • Consolidation of debt provided that there is affordability for the customer to repay the higher bond amount and sufficient equity in the property to repay all debts.
FNB advises clients to come in one month in advance, before they would like go on the payment holiday.
Nedbank and Absa do not offer payment holidays. However Nedbank said that, "we do offer a helping hand should clients fall behind with payments or are struggling to make ends meet. We recognise that this is a stressful time for our clients and would like to help."
Standard Bank advises its clients not take a payment holiday. "Standard Bank does not encourage consumers to suspend their monthly instalment on any of their debt.
"It is difficult for consumers to make up the payments and any interest that is incurred. However, when one finds themselves in financial difficulties, it is recommended that contact is made with one's bank to try and find a way forward," said Steven Barker, head of home loans at Standard Bank.

Recent Articles

Featured Can you take out vehicle finance on an old vehicle?

As it turns out, creditors have several concerns regarding cars older than 10 years. Justmoney has a look at why creditors are sceptical of older vehicles and what you can do to get around this.

Should you have a living will in place?

When you hear the word will, the only thing that comes to mind is the document that states who is going to inherit you property when you’re dead. But have you thought about who’s going to decide what happens to you when you become incapacitated? A living will can help you do just this.

Know the difference between a loan and a credit facility

Choosing the correct product according to your needs is critical in making smart financial decisions. Credit options can be separated into two main categories – loans and credit facilities. But for some people, the lines can be quite blurred between the two.

Is property a good investment?

It’s good to consider whether property is a good investment. Justmoney spoke to numerous specialists to find out whether this is the case in South Africa.


DaVinci’s on Kloof Students Discount

Price: Available on request
When: Daily
Where: Cape Town

Ghandi's Backpackers and Guest Lodge 10% Discount

Price: Available on request
When: Daily
Where: Johannesburg

Fairway Hotel Happy Hour Special

Price: Available on request
When: Until 13 December 2019
Where: Johannesburg