BY Fast Company 2 MINUTE READ

In this locked down economy, loan customers are under financial strain as they face retrenchment, unemployment and slashed salaries. One of the biggest stressors in this situation is the repayment of loans. However, most banks offer some form of financial relief to their customers, provided they are up-to-date with their installments.

A payment holiday is an agreed-upon break with your financial institution that will enable you to skip your monthly credit installments for a short period of time. In addition, your credit score at credit bureaus and records of your payment behaviour will not be negatively affected.

Basani Maluleke, CEO at African Bank says that instead of missing a payment and being in arrears, a payment break offers some breathing room for the short-term, while you may be struggling to meet your monthly payment commitments. Payment breaks are available to selected customers who have a good paying record and who have demonstrated good paying behaviour. Essentially, it is a show of good faith from a bank saying that for next one to three months you will not be penalised

This concession mostly applies to fixed installment credit agreements, like a personal loan and are sometimes unavailable to credit card holders.  However, each bank will have their own set of requirements and certain conditions attached to the agreement. Loan customers who wish to take up a payment break, should research all the facts before opting in for a payment break.

While a payment concession may seem like a lifeline during this tough financial period, particularly for SMEs, experts warn that they are not as simple as they seem. Maluleke warns that payment holidays are not as simple as they seem, and credit customers should be aware of how their decision will impact their loan cost in the long term.


  • Taking a payment break during the term of the personal loan does not change your monthly installment amount.
  • Instead, the term is extended to take into account fees and interest that accrue during the payment break period.
  • Once the lockdown, or period in which you take out your payment period ends, customers will still be expected to pay the interest on fees on their loans that have accumulated over the three months.
  • In the end, the payment break will cost you more, but you will have gained the immediate relief from a constrained financial position.
  • Most importantly, by opting in for a payment break you will not be penalised at the credit bureau for inconsistent payment behaviour.
  • Considering the coronavirus pandemic’s impact globally, many South Africans may have no choice but to consider a payment break option, says Maluleke. However, it is important to be fully aware of what terms and agreements the bank is altering before making a decision. Understand what you are getting into before signing on the dotted line.