Tempting, isn’t it. You’ve been stood down but you’ve still got that home loan and pesky credit card bill.

Deferral sounds like the answer. If you have been stood down and are faced with the prospect of paying your home loan with no income, should you jump on the “bank wagon” and get a home loan deferral?

Sometimes, you may not have a choice. But first consider cutting expenses and seeing what’s left. And consider these five things before you jump.


1. No such thing as a free lunch

If you defer interest repayments, it will be added along with any principal repayments to be repaid off during the remainder of your loan term. So your home loan repayments will be much higher after your six-month deferral period.


2. Take back your own cash

If you are ahead on repayments, you can “redraw” funds. This means access to cash injections which will come in very handy. The Commonwealth Bank has 1.6 million home loan customers. About 40 per cent of them are at least two to three years ahead on repayments. Drawing down is a much better option than deferring your loan repayments, because you don’t have to pay interest on it.


3. Very interesting

You may also want to opt for interest-only repayments on your home loan. This will provide you with some breathing space as it frees up some much-needed cash on your bank balance, which won’t rebound on your later.


4. End of term

You should also consider early access to term deposits. The Bank of Queensland is offering this service with a fee waiver. Remember, it’s cheaper to give up the deposite rate – which is pretty miserable these days – then to borrow more.


5. Not so fantastic plastic

None of the big four defer credit card payments. The enormously high interest rates on credit cards are meant to be a deterrent enough to keep you from overspending. ING offers a three-six month payment pause on credit cards.  But there’s a big caveat – you will not be able to use the credit card while the pause is on.

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