A guide to postponing loan payments: what you should know

Dealing with debt can be frustrating, especially if unexpected expenses arise. And if you have a loan, it may make things seem more overwhelming. While there are options available to help manage your debt, one of them is postponing loan payments.

Although a postponed loan payment could provide temporary relief as it would free up cash to address financial issues, such as a car repair or medical emergency, it's important to understand the possible outcomes of postponing a loan payment.

In this article, we’ll guide you through the process of postponing a payment and explain what happens to such payments. We’ll also provide you with how to complete the process if you choose to.

Here’s what you should know first…

When it comes to postponing loan payments, there are 2 cases to keep in mind. The first is during special circumstances, such as the COVID-19 pandemic, when the Central Bank of Jordan (CBJ) allowed borrowers to postpone their loan payments without limitations. 

The second is during ordinary times, when borrowers are subject to certain limitations by their banks. In such times, some banks allow customers to postpone their loan payments every 6 months. For example, if you took out a loan in March, you could postpone an instalment in September and again in April 2024, provided that you’ve paid your previous instalments in full.

Now, what happens to a postponed payment?

As you may know, your monthly payments are made up of 2 components: principal and interest.  

The principal is the sum of money you borrow from the bank, whereas interest is the cost of borrowing money. 

When you postpone a payment, the principal portion of your monthly payment will be equally distributed over your upcoming instalments. However, the interest portion will be added to the loan principal amount, which is the amount still owed on a loan.

Here’s an example to paint a clearer picture. Suppose you took out a loan of 15,000 JOD, with a term length of 5 years and a monthly instalment of 250 JOD, where 150 JOD is allocated towards the principal and 100 JOD towards the interest. 

If you decide to postpone a payment, the principal amount for that month (which is 150 in this example) will be equally spread across your remaining 54 instalments (60-month term - 6 months = 54 months). The interest amount for that month (which is 100 in this example) and the additional interest charges that result from spreading the principal amount (150) across your remaining instalments will be added to the total amount you owe.

What does this mean for you?

As we mentioned, the principal portion of the postponed monthly payment will be equally distributed over your remaining payments. This means you will pay more every month.    

In addition, postponing a loan can sometimes lead to what’s known as a balloon payment, which is a larger-than-usual payment you would have to make at the end of your loan.  

Balloon payments can happen when the interest portion of monthly payments accrues over an extended period. 

Although they usually have to be paid in one go, some banks offer loan restructuring options to make it more manageable for borrowers to repay their balloon payments. This can either be by increasing monthly payments or extending a loan's repayment period.

Want to learn more about balloon payments? Click here.

Postponing single or multiple instalments may relieve you in the short term, but it’s important to keep in mind that your financial situation may change. You may experience job loss or unexpected expenses that could make it challenging to keep up with your payments in the future.  

So, it’s necessary not only to take the time to weigh the pros and cons of postponing a loan payment, but also to have a backup plan in case things don’t go as planned. This can include having an emergency fund and additional sources of income. 

It’s also important to remember that postponing loan payments should be a last resort. So, even if you’re given the option, it’s best not to take it.

So, how do you postpone a payment? 

At Bank al Etihad, there are 2 ways you can submit this request. Either physically at one of our branches for a 10 JOD postponement fee or remotely via our mobile banking app for free. 

One extra benefit of submitting your request through the app is that you’ll instantly know if you’re eligible by checking if the “Delay payment” button is present. 

To postpone your loan through the app, follow the steps here.

We hope this article has helped you understand what to consider before you postpone a loan payment. And remember, if you’re struggling to make your loan payments, please reach out to us. We’re here to answer your questions and help.