As lifestyles and work patterns have become less predictable over recent years, borrowers have increasingly looked towards flexible loan agreements that bend to them rather than dictate to them.
Flexible loans which include payment holidays or ‘breaks’ can be ideal for people who are self-employed or whose earnings are more heavily based on commission payments and have varying patterns of income throughout the year. They are also favoured by those who might want to take a career break, start a family, shoot off around the world or return to study. Simply put, they allow you to repay and borrow in a way that suits your changing lifestyle.
Many flexible loan agreements allow you to also overpay when you want to. This is extremely important if you’re planning to take a payment holiday at some point as it will allow you to get ahead of yourself so that you don’t incur additional interest charges when it comes to the time you’re looking to take your payment holiday. They give you control and rather than adapting your lifestyle around your loan, you can bend the loan to suit your needs. If you do overpay some months, you’ll then be able to borrow back your overpayments at a later date if necessary by underpaying during your payment holiday.
There are, however, certain things to consider when choosing a loan that offers payment breaks. Firstly, because of the increased flexibility, you tend to pay more for flexible features and the APR is usually higher than a traditional personal loan. Therefore, it may be worth bearing in mind that flexible loans are more suited to borrowing over a shorter period of time and they can be a handy reserve should any unexpected expenses arise. You’re also likely to be granted a larger borrowing facility with a flexible loan compared to an overdraft facility as most lenders would not be keen to provide you with a permanent overdraft facility much in excess of your net monthly income.
However, taking payment holidays afforded by a flexible loan agreement has been one of the benefits welcomed by people whose income fluctuates each month and by those looking to deviate from their usual pattern of everyday life.