{"id":384,"date":"2020-04-27T13:06:46","date_gmt":"2020-04-27T03:06:46","guid":{"rendered":"https:\/\/bantacsfinancialsolutions.com.au\/Nblog\/?p=384"},"modified":"2020-04-27T13:06:47","modified_gmt":"2020-04-27T03:06:47","slug":"loan-repayments-and-covid-19","status":"publish","type":"post","link":"https:\/\/bantacsfinancialsolutions.com.au\/Nblog\/loan-repayments-and-covid-19\/","title":{"rendered":"Loan Repayments and COVID-19"},"content":{"rendered":"
\n

For years I have urging borrowers to get ahead in their loan repayments, not only to provide a safety buffer if interest rates rise or they suffer financial stress, but also to save a fortune in interest.<\/p>\n

I was horrified when a Commonwealth Bank client sent me an email they had received which read: \u201cWe\u2019re taking steps to continue providing the financial support our customers need. This is why we\u2019re making a one-off change to your home loan direct debit repayment amount, reducing it to the current minimum required payment.\u201d The bank then clarified that this was an \u201copt-out\u201d procedure, that is, borrowers who want to continue with higher repayments must go out of their way to do so.<\/p>\n

Any marketing consultant will tell you that setting the default to \u201copt out\u201d is a major tool in getting people to make a change you would like them to. Think about it: most of us suffer from a barrage of paperwork, seldom read the fine print, and even the thought of having to go to somebody\u2019s website and do all the hard work to \u201copt in\u201d is enough to make us shudder. It is hardly likely to happen.<\/p>\n

it\u2019s hard to escape the conclusion that it\u2019s just a sneaky way for CBA to boost its profits. The bank could just as easily have written to their customers along the lines of, \u201cWe appreciate these are tough times, but urge you to continue making your payments at the current level to pay off your loan as fast as possible and continue saving interest. However, if you need to reduce your payments, please contact us.\u201d That would make the option available to those who need it, but by making it \u201copt in\u201d not \u201copt out\u201d more people would keep making the higher payments that are in their own best interest as long as they can afford them.<\/p>\n

Thanks to COVID-19, many financial institutions are making a lot of noise about being \u201chere to help you\u201d. Unfortunately, most of their offers come in a poisoned chalice. It\u2019s not just the Commonwealth Bank offering borrowers a chance to reduce their monthly mortgage payments, it\u2019s also the other institutions offering the opportunity to defer six months\u2019 mortgage payments, or three months\u2019 credit card payments while interest and fees continue to accrue. This is just another ploy by lenders to collect interest on interest. Don\u2019t fall for it.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

For years I have urging borrowers to get ahead in their loan repayments, not only to provide a safety buffer if interest rates rise or they suffer financial stress, but also to save a fortune in interest. 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