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Australia’s banks will now extend loan deferrals for another four months for customers who are struggling to make repayments by the end of their initial six-month deferral period.
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Banks to extend COVID-19 loan deferrals beyond ‘September cliff’
08 July 2020
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The new extension will be processed on a case-by-case basis depending on individual circumstances, with the banks expecting those who are able to resume repayments to start doing so by the end of their six-month deferral in September.
The additional deferral will also have no impact on a customer’s credit report or their credit rating.
Australian Banking Association chief executive Anna Bligh said over 800,000 people had now deferred over $260 billion worth of loans since repayment holidays were rolled out back in March.
“This next phase of bank support will avoid a ‘cliff’ for customers in September and give them the breathing space they need to work with their bank and get back on their feet financially,” Ms Bligh said.
“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it. Encouragingly, many customers have already chosen to resume making repayments.”
Business and mortgage loan customers seeking the further four-month extension will be required to work with their bank to restructure or vary their loan.
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These options include extending the length of the loan, converting to interest-only payments for a period of time, consolidating debt, or a combination of these and other measures.
“If, during or at the end of any deferral, customers continue to be severely financially impacted and are unable to make repayments, they will be assisted through their bank’s hardship process to determine the best long-term solution for their individual circumstances,” Ms Bligh said.
The second phase of support comes as the Australian Prudential Regulation Authority (APRA) extends regulatory relief to the banks to encourage them to further support their customers.
Treasurer Josh Frydenberg welcomed the announcement and thanked the banks for agreeing to extend support after concerns were raised about a September economic cliff due to the legislated end of the JobKeeper payments coinciding with the end of loan deferrals.
“The government acknowledges and thanks the banks, APRA and ASIC for their collective efforts in support of Australians who are facing financial hardship during this difficult time,” Mr Frydenberg said.
“It is important that customers that can afford to make repayments continue to do so. Borrowers that are facing considerable financial difficulty as a result of this pandemic should talk to their banks and work with them to find a more sustainable approach.”
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