Sep 2020 2nd edition

Payment holidays could cost more

Written by Allison Cooper

People who have not been financially impacted by the effects of the Coronavirus Disease (COVID-19) should continue paying their debt, because payment holidays could cost them more money. 

According to the Office of the Ombud for Financial Services Providers (FAISOmbud), people who are struggling financially must be careful of accepting or applying for payment holidays because this can increase the amount they have to pay back.

A payment holiday is when a payment date is delayed to another month or when a repayment time period is made longer.

Do you need a payment holiday?

If people accept payment holidays, they have to adhere to new contract terms. If they don’t, their credit profile can be negatively impacted.

The FAISOmbud explains that buying things on credit, rather than paying cash, makes them more expensive because credit comes with interest, fees and charges. Interest is calculated daily, so if a consumer misses a payment or pays less than they should, the amount they owe does not get smaller and the repayment term becomes longer. 

The FAISOmbud appeals to consumers to apply caution when considering a payment holiday and to truthfully ask themselves these questions:

  • Can I continue to pay monthly payments?
  • Do I need a payment holiday because my finances have been affected by the COVID-19 pandemic?
  • How long do I need a payment holiday for?
  • How will a payment holiday affect my credit history at the credit bureau and with the credit provider?
  • Have I calculated how the interest, fees and charges will add up? What effect will this have on the amount I must pay back?
  • Will a payment holiday restructure my existing credit agreement? Or will I have to pay the full instalment and a portion of the arrears when the payment holiday ends?

Credit providers do not have to accept repayment offers, consumers must be proactive by negotiating with them, the FAISOmbud says. “Establish whether they can defer monthly instalments for the specific period and zero-rate the interest and costs. This would provide relief to consumers who would otherwise have to pay more towards the total cost of the credit.”

For more information about the FAISOmbud, visit or call 086 066 3247.

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