Payment Holiday

Payment holiday is a term that is widely used in the mortgage industry. You may also hear it being used by loan providers too.

A payment holiday is something which allows a borrower to temporarily reduce or stop their monthly repayments. Usually payment holidays will last for between 1 and 12 months.

Not all mortgage and loan providers offer the option of taking payment holidays. Either way, it will be outlined with their terms and conditions.

Whenever a borrower is looking to take a payment holiday, they must first agree this with their lender/provider.

In the case of mortgages, many lenders will require that you’ve made overpayments in the past for you to be eligible. You can then essentially use the overpaid amount as credit to fund the break from payments.

If you’ve ever failed to make a payment on your loan or mortgage and they’ve subsequently fallen into arrears, it’s highly unlikely that you’ll be eligible for a payment holiday.

Why might someone take a payment holiday?

There a several reasons why a borrow may choose to take a payment holiday. It may be because they’ve suffered a loss of income having been made redundant or relationship breakdown A significant life event such as the arrival of a child and subsequent maternity and paternity leave is also a popular reason to take a payment holiday.

If someone has been diligently overpaying on their mortgage, but decides they’d like to ease some pressure for a few months, many lenders may also accept this as a valid reason.

Are there any drawbacks to taking a payment holiday?

Yes, there are several things to bear in mind before committing to a payment holiday.

Firstly, whilst you’re not reducing the outstanding balance, interest will continue to accrue.

This means that when your payment holiday is up, the outstanding balance and subsequent monthly repayments may be higher than they were before the holiday.

In several cases, many borrowers have reported a reduction in their credit score following a payment holiday – despite making an agreement with the lender.

Some lenders will warn that a payment holiday may reflect as a missed payment on your credit file irrespective of the agreement.

Always check with your providers terms regarding how they report payment holidays to credit reference agencies prior to committing.

If you have suffered a loss of income, contact your provider as soon as possible. Often they’ll be able to provide a reasonable solution to your problems.


Payment holidays can be useful for anyone looking to ease the financial pressure being caused by their loan or mortgage.

They allow you to take a pre-agreed break (of between 1 and 12 months) from your repayments. During this time you may choose to reduce the amount you’re paying each month or stop paying altogether.

It should be warned that they negatively impact your credit history, so tread carefully before entering into an agreement.

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