Lloyds loan repayment holiday

Archer0710

Hi

I have a Lloyds loan it was originally £20k over 5 years at 7.9%. It is 3years and 2 months in and I have never missed or paid late any payment on it.

My credit score is currently pretty bad due to an unpaid default with Next.....no excuses just bad organisation on my part. It's only £272 but today my DH has bumped his car so the money I had saved will go on the excess.

What effect will taking a one month payment holiday have? Will it just extend the term by one month.

I want to settle this default as it's the only negative on my credit file and I want to sort out a new car in the future myself.

Any advice?

[Deleted User]

What do the terms of the loan say? Are you allowed to take a payment holiday, or is it just something you were hoping to do?

Knowing that will help establish how it might be marked on your credit file.

chalkie99

You will need to speak to Lloyds first but I would be pretty sure that you will have an extra months interest added on even if they agree to it. It won't be a case of just making the normal monthly payment after the loan ends.

fracturedsun

Hi I have an LTSB loan too (though have not taken a payment holiday) as I understand the terms of my agreement: You can take a payment holiday without additional penalties but interest will continue to acrue that month (so you get one month and one month's extra interest tacked on to the end of your loan and I guess compounded). Otherwise there's no effect, either to your credit rating on your repayment terms.

You'll need to check that that is the same for the agreement you signed though.

Archer0710

Terms say I can take up to 2 x repayment breaks of one month in a year as long as they are not consecutive.

For an idiot.....what impact would the additional interest have? I just want rid of this stupid default now to start repairing my credit rating.

fracturedsun

Archer0710 wrote: »

Terms say I can take up to 2 x repayment breaks of one month in a year as long as they are not consecutive.

For an idiot.....what impact would the additional interest have? I just want rid of this stupid default now to start repairing my credit rating.

I think approximately:
Amount left on loan x APR/100 /12 = y (1 months interest)
Amount of interest on that (z) = y x APR/100 x amount of time left on loan in years
Total increase = y + z

You can decrease this by making extra payments in flusher months though if it worries you. Will probably take 2 (maybe 3) months extra to end.

paddyrg

If you take a payment holiday, that month's payment will still be owing, plus the interest for that month (and any fees you may have to pay for the privelege - it will say in your loan agreement).

The interest is the bit that will hurt, especially if you're early on in the loan (in which case nearly the whole payment will cover interest). This will be added back to the debt, and of course it compounds along with the rest of the loan. It will effectively take you back another month (or just under), so in effect add 2 months to your all-clear date for each month you take a payment holiday (very roughly), more if fees are added.

Archer0710

How thick am I.

Does that mean that as long as I overpay which I am happy to do I can minimise the impact.

It's £406 a month at 7.9% interest. Amount outstanding is approx £7900.

I am useless at saving but find overpaying easier.

I assume clearing the default is the best thing to do.

paddyrg

Overpaying will always work for you, and the sooner you can overpay, the better (as if you pay £10 extra, that is £10 directly off the outstanding principal, and all the compound interest that would be due on that - so a tenner overpaid right now saves you even more (about £11.50) off the loan (although there will be adjustments for overpayment, but in principle it'll give you the idea).