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How to avoid financial difficulties?
Reduced income, loss of a job, unexpected furlough and uncertainty about the future can happen to anyone.
That is why it is important to have an overview of your own and your family’s income, costs, loan obligations and loan payment deadlines, and to think through what to do if the income should decrease unexpectedly.
- Write down your income and costs, and put together a family budget. That will help to reveal the actual financial situation and options.
- Analyse and draw conclusions on which costs could be postponed if necessary.
- If your income has decreased significantly, try to find out about the possibilities of deferring your loan. Do this as early as possible because if you are already late with your loan payments, or in breach of the contract you concluded with the loan provider, the loan provider might refuse to defer your loan.
- If necessary, turn to a debt counsellor who will help to review the existing obligations and will give instructions on how to move forward and what to do. People who have registered as unemployed and jobseekers can also get free debt counselling from the Estonian Unemployment Insurance Fund.
How to act in case of payment difficulties?
If you have gone in debt due to loan, instalment or lease payment issues because of decreased income, deal with it without delay. Quick action creates a good basis for reaching a deal that suits both parties, helps to avoid a mark in the Credit Register or additional costs due to fines for delay.
Options for mitigating payment difficulties:
- Deferring payments on the principal amount of the loan
- Full deferment of payments
- Extending the deadline of the loan contract
- Bundling the loans into a bigger loan
- Selling or exchanging assets
When would deferring a loan make sense?
- What is a deferment of loan payments?
A loan deferment is an agreement with the bank to postpone making payments on the principal amount of the loan or the loan interest for a certain period of time.
- When would it be a good idea to defer a loan?
The decision to defer a loan should not be taken lightly, as the monthly payments go up after the deferment. Still, in certain situations (e.g. loss of a job, lay-off, disappearance of income, sickness, addition to the family etc.) a loan deferment might be the only feasible mitigation.
- How long a deferment could I get?
For housing loans, the loan deferment given is generally 3 to 12 months, for leases and consumer loans it is 3 to 6 months.
- What happens with the interest payments?
Depending on the type of the loan and other circumstances (e.g. income has disappeared completely), the creditor might also defer the interest payments.
- When will I make the deferred payments?
The sum of the deferred payments will be distributed to the remaining loan period, the contract deadline will be extended if necessary. The other conditions of the loan contract will not change.
- Is deferring a loan a paid service?
Generally no service fee is applied to formalising a loan deferment or the service fee is smaller than usual. In some cases there might be a fee for amending the contract. Find out the exact conditions from your creditor.
Last updated: 11.11.2021