Bounce Back Loan Repayments
For most companies that took advantage of the Bounce Back Loan Scheme when it was first made available the 12 month repayment holiday will soon be coming to an end.
The interest for the first year of the loan will have been paid for by the government.
When your loan repayments start, your loan interest charging frequency will change from monthly to quarterly. Interest will continue to accrue daily on the balance you owe, but will now be debited from your loan account quarterly, on the last business day of March, June, September and December each year, instead of every month. This means that you will pay slightly less interest across the life of the loan and your final instalment will be reduced as a result.
If you no longer need the loan, you can choose to pay it back early. You’ll then pay less interest. There are no early repayment charges and you won’t pay any interest if you pay the full amount before any repayments fall due. Or you can make a one-off repayment, as well as additional payments on a regular basis. Doing so will also help save you money on your interest payments.
If you have other borrowing, you may want to think about repaying that before making additional payments to your Bounce Back Loan.
The government has announced Pay as you Grow options for Bounce Back Loan borrowers to help businesses get back to regular trading. Pay as you Grow could give you more time and flexibility to pay back your loan. Using these options won’t affect your credit score, though it may influence how banks assess your creditworthiness in the future and your loan may cost you more overall.
There are a number of options available if you expect to be in a better position to repay in the future :-
1.You could reduce your monthly repayments for six months by paying interest only – the total amount you owe will go up. This is because your interest costs increase as you’re repaying your loan over a longer period. This option is available up to three times during the term of your Bounce Back Loan.
2.You could take a payment holiday for six months. You’ll make no capital repayments or interest payments during this time. This option is available once during the term of your Bounce Back Loan.
3.You could request an extension of your loan term from six years to 10 years at the same interest rate of 2.5%.
You can use options 1 and 2 together with option 3 if you need to. Both options 1 and 2 will be available throughout the course of your loan term, in conjunction with option 3 if you wish.
You’ll be able to apply for the Pay as you Grow options two months before your first repayment. Your bank contact you to remind you of your options and with more information on how to apply. However, if you’re worried about your finances in the meantime, or are concerned about your ability to make your repayments, please contact your bank immediately.
If you would like to discuss this in any more please contact us.