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What to do when your payment holiday is over

Five money tips that can help you manage your finances and stress load when payment holidays on bills or loans comes to an end.

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If the curveballs of 2020 have put a strain on your money, then chances are you may have asked for a “payment holiday” from the odd bill or loan repayment.

The Financy Women’s Index Report for the March quarter warned that unemployment, pay gaps and an increase in unpaid work are all at risk of increasing for women in 2020.

Recent research from Finder also shows that nearly 1 in 5 women (19%) have deferred a bill because of COVID-19.

Fortunately, banks and other lenders have stepped up, with many releasing clear information about support options, including payment deferrals for mortgages, personal loans and credit cards. Some phone and utility companies have offered similar support.

The details are different for each institution, but typically you could request a three-month payment deferral from March 2020, with the option of extending it to a total of six months.

For many people, that has helped take some financial pressure off because the money usually put towards their accounts can go on other essential costs.

While this is sometimes referred to as a “payment holiday”, the balance of your loans and cards doesn’t go anywhere. In fact, it could actually increase through interest charges. And all of that will need to be paid back eventually.

So, let’s take a look at five tips that will help you manage your money as these repayment freezes come to an end in the coming weeks and months.

  1. Take a look at your money situation now

When you apply for financial hardship, the provider will usually check in with you at regular intervals to see if the situation has changed. It’s also really valuable to do this for yourself before you talk to your bank or other provider.

Is it still tough to manage all your essential costs? Or have things eased up? If you’ve been able to work from home, you may have even saved some money on transport costs.

Go through your recent transactions, check your account balance and factor in any changes to your income (e.g. if you’re on JobSeeker and the payment drops). That way, you’ll be able to work out what you can afford to repay on your deferred accounts.

If it’s looking like repayments will continue to be a struggle, this information will help you discuss other financial hardship options, which are changing as this situation continues to unfold.

  1. Be prepared to pay a bit more

If you have deferred a mortgage, personal loan, credit card or other account that charges interest and fees, these costs will factor into your payment schedule when repayments start again. Put simply: the interest and fees add to your debt during a payment pause, which means your old repayments won’t cover as much of the debt.

This usually means the value of your repayments will go up to cover these costs and the higher account balance. Another option is that your loan term could be extended, so you’d still pay the same amount as before but for longer.

Either way, you’ll usually end up paying more over the life of the loan. But the approach you take now can help take some of the financial strain off in the short term. You can check with your bank to find out which approach it takes and discuss which option you think will work better for you.

  1. Make extra payments (if you can)

Extra payments can help you pay off your debt faster at any time. After a payment pause, they also help balance out the charges that have added up. If you’ve looked at your money situation already, you’ll have a better idea of whether or not you can make extra repayments right now – and where that money could come from.

For example, if you’ve saved by not spending money in what used to be regular expenses – such as transport costs, lunches or dining out – then it might be possible to put some of that towards your repayments.

If you’re not spending less, another option is to use any money you get back from your tax return. Or, if you have been refunded for holiday bookings or other events you planned this year, you could put some (or all) of that towards your debt.

  1. Look at other ways to cut costs

Even when money is tight, we have an opportunity to look for a better deal. As an example, if you have recently got an eye-watering energy, phone or Internet bill, look at how it compares to the costs offered by other providers or plans. There is a good chance you’ll be able to find a better rate.

You can also do this for your credit cards, loans, bank accounts, insurance or anything else. If you do this for most of the accounts and services that you pay for, you could save a lot of money on your regular bills.

It’s also worth taking a look at your bank statement or account to see where all your money is going – and whether you can cut down on spending in some areas.

There are even apps that can help you save time. For example, the CommBank app breaks your spending down into different categories, MoneySmart’s TrackMySPEND helps put these details into a budget and the Finder app gives you a breakdown of your spending and suggestions on how much you could save by switching to a different option.

  1. Ask for help

If you find you’re feeling overwhelmed by money matters (or anything else), remember that you can get support. As well as talking to your providers, you can call the National Debt Helpline on 1800 007 007 to get free advice on how to manage your debts (the website also has plenty of useful, free resources).

Beyond Blue also has a 24-hour coronavirus mental wellbeing support service, which you can reach by calling 1800 512 348. There is also an online forum, chat service and other resources you can access by visiting the website.

Right now, we’re all experiencing a lot of uncertainty and a lot that’s out of our control. But our money is something we can take control of – and using just one of these tips will get you started.

Amy Bradney-George is an editor and writer at comparison site Finder.

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