When you take out a loan of any type, you typically agree to something known as a loan repayment period or repayment term. This is a specific amount of time you have to pay off the full loan. This can be anywhere from a few months to several years. Your repayment period divides the total amount to be repaid into equal regular payments. However, can you extend this repayment period?
When you pay down debt, it’s called amortisation. Over the life of the loan, your interest is calculated into the total repayment term. A longer-term usually results in greater interest over the life of the loan, while a shorter loan might have less interest. While you can pay your loan off faster to avoid higher interest, there are some cases when you might wonder if you can extend the repayment period of your loan.
How to Extend Your Loan
Before we begin, is it possible to extend your loan in the first place? If you want to extend the repayment period of an existing loan, this is at the discretion of your loan provider. Some lenders are more flexible than others, but it will ultimately be their decision. If you’re experiencing financial hardship, there might be extension programs specifically to help.
Practical ways a lender might help could be:
- Temporarily suspending payments for a specific amount of time
- Freezing or reducing interest
- Lowering your monthly repayments for a period of time
However, any of these agreements might result in higher costs down the line or a greater loan term. The interest might also continue to grow in the background, increasing the overall cost of your loan over the life of the loan. In general, the longer it takes to repay your loan, the greater interest you pay.
If you want to extend your loan, the only way to do this is by contacting your lender. You can do this online, in person, or over the phone. Once talking to a representative, explain your situation and ask about extending your loan. From here, you’ll discover what options are available to you.
Pros and Cons of Extending a Loan
With that in mind, choosing to extend a loan is a big decision. This isn’t something you should do lightly. In some cases, there might be an alternative debt payoff solution that’s more effective and affordable. That’s why we’ll take a closer look at the pros and cons of extending a loan.
Pros of extending your loan over time:
- There is a greater length of time to pay it off fully
- You stay with the same loan provider
- This is not usually shown on a credit report
- Avoid missing a payment or defaulting on your loan
Cons of extending your loan over time:
- You’re tied to payments for a longer duration of time
- You’ll pay greater interest over time, costing you more
- There might be added fees and restrictions
There are many valid reasons to consider extending your loan. In most cases, if you’re happy with your lender but unable to make full payments, an extension might be the right fit. As long as you calculate the long-term cost into your budget, it can be a safe, effective decision. Whether or not you’ll be approved for your loan extension depends on your situation, payment history, and credit rating.
Are There Alternatives to a Loan Extension?
In some cases, you might determine a loan extension isn’t the right fit for you. Similarly, you might not qualify for an extension with your current lender. Luckily, there are a lot of debt payoff solutions that might be a better fit. However, with any financial decision, it’s important to consider the long-term cost as well as your future goals.
The most common option is to refinance your loan with a new lender. This is when you essentially get a new loan to pay for the original one, typically with a better interest rate or different loan period. You might extend your mortgage or car loan, for instance, over a greater period of time to lower your monthly payments with a new lender.
If you’re dealing with a personal loan or credit card debt, a cash transfer card might be the easiest fit. Many of these come with lengthy intro periods with low rates. Though you might have to pay a balance transfer fee, this can still save you money over time. If you’re juggling many different loans, it could also be time to consider debt consolidation.
Is a Loan Extension Right for You?
Are you considering whether it’s right to extend the repayment period for your loan? If so, this is a common question amongst those who have trouble paying their current repayment amount. Financial difficulties strike when they’re least expected, and it’s okay to admit you need help getting through this process.
When in doubt, reach out to the experts at Debt Busters on 1300 368 322. Our team of professionals can help you determine what steps are right for you depending on your unique situation.