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Financial Dictionary - Partial payment holidays

Partial payment holidays

When you apply for a loan or credit, whether for yourself or a company, the bank must provide you with the repayment plan you have to comply with. This repayment plan will include a range of variables, such as the repayment period, the instalments to be paid each month, the type of fees and the percentage interest rate established when the loan was agreed.

A partial payment holiday is established when a customer who has applied for a loan asks the financial institution if they can pay just the monthly interest, deferring the monthly repayment. Unlike total payment holidays, where the customer does not pay either the repayment instalment or the proportional part of the interest or fees, in a partial payment holiday, they pay some of the financial commitments agreed when the transaction was approved.

Partial and total payment holidays can be applied for at any time during the term of the loan. However, it is best to do this at the beginning as the initial monthly payment will be lower and, therefore, it will be easier to agree and for the customer to afford.


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