When subscribing for a loan, deferred repayment can be a good solution when the borrower is facing a difficult financial situation. In order to borrow now and repay later, the bank may use different credits provided the necessary resources are available and the bank accepts a deferred refund.
Refund with partial payment deferral
When subscribing to a mortgage or consumer credit, the borrower may, in agreement with the bank, make a partial deferred repayment.
This deferred repayment consists of repaying only the interest on the loan, the expenses and the insurance premium for a certain period agreed with the creditor. Nevertheless, the remaining capital does not change which, therefore, can increase the cost of credit.
Example: Mr Dupont asks for a partial deferral of payment of 3 months for his € 150,000 home loan. Following this delay, Mr. Dupont will have honored the interest and the insurance premium on his loan but will not have paid back any capital. As a result, Mr. Dupont’s loan is still € 150,000 but he can borrow and repay in 3 months.
Refund with a total deferment of payment
It is also possible to realize a total deferred repayment when subscribing a loan, whether it is for consumption or real estate.
In fact, repayment by total deferral of payment consists of paying only the insurance premium for a period agreed with the creditor (usually the bank). As a result, the borrower does not repay interest or capital during the deferral.
However, it is important to remember that a deferred repayment increases the cost of a loan in proportion to its deferral. More specifically, the longer the deferred repayment, the more the borrower will increase the cost of his credit because the insurance premium will continue to be deducted.
In the end, it is possible to borrow now and repay later. However, it is important to consider the increase in the cost of credit, which can be relatively large depending on the deferred repayment period.