Before you start wondering about what would happen if you were to default repayments to Bounce Back loan, it is important to understand how it works. Do this before you pay back your Bounce Back Loan!
The pandemic has lead to troubling and challenging times, especially for small to medium-sized businesses (SMEs) that depend on their day-to-day operation to survive. With almost the entire nation having stayed indoors during the pandemic, these businesses are in the brink of collapse as an aftermath.
For times like these, effective measures by the government were the only way to ensure the survival of most businesses in the UK.
The UK government thus launched a loan program for SMEs – The Bounce Back Loan Scheme (BBLS).
All Bounce Back Loans have these standard features
- A loan amount of between £2,000 and £50,000
- A fixed interest rate of 2.5%
- No payments for the first 12 months – the government will pay the interest during this time
- A six-year loan term (the first year of this is your repayment holiday)
- Your capital payment amount will be the same each month, but you’ll pay less interest each month as you repay the loan. This means your first monthly repayment will be the highest
How much will you have to pay back on your loan?
Your bank, for example, is one source. Do you want to know how much you’ll have to pay each month? Anyone who needs to figure out their monthly installments can use our FREE online loan calculator. It can handle a variety of loans, including Bounce Back loans, regular repayment loans, and interest-only mortgages.
All you have to do is enter a few figures, and it will immediately calculate how much you will have to pay. You can examine the impact on your cash flow before you join up this way!
Whether you’re planning to buy a home or refinance an existing mortgage, our calculator may save you time and money by providing realistic estimates of your monthly payments at various rates. Give it a shot right now.
To use our FREE online loan calculator right now, go here.
When will I be able to start repaying my Bounce Back Loan?
For the first year of your loan, you were given a payment holiday, with the government paying the interest through a Business Interruption Payment. After the first 12 months, you’ll be required to begin making monthly installments to repay the amount borrowed, plus interest, beginning on the date your repayment holiday ends.
We’ll collect your payments automatically using the payment information you provided when you applied for the loan. Please let us know if your payment information has changed since then.
If you pay off your debt early, you’ll save money.
Alternatively, you can make a one-time payment of any amount, as well as frequent ongoing payments. If you do this, you’ll be able to save money on interest payments.
I’m unable to repay my Bounce Back Loan; do I have any options?
Bounce Back Loans were previously available for a six-year period with no monthly payments for the first 12 months. The government also offered to cover the interest on the loan for the first year. However, the first Bounce Back Loans were taken out more than a year ago, and now that the initial payment holiday has passed, many people are confronted with an exorbitant monthly payment.
The good news is that the government has announced a change to the Bounce Back Loan scheme to assist businesses in repaying their debts. This has taken the form of the Pay As You Grow (PAYG) initiative, which provides a company with additional breathing room when it comes to making monthly Bounce Back Loan repayments.
What is Pay As You Grow?
A standard Bounce Back Loan has a 2.5% fixed interest rate over a six-year term, with no principal repayments for the first 12 months. Your capital repayment amount is the same each month, but you pay less interest each month as you repay the loan.
This means your first new monthly repayment (or your first repayment after a repayment holiday ends) will be the highest and repayments will then reduce each month until the loan ends. You can make overpayments whenever you like, or repay the loan in full at any time, with no early repayment charges – even if you use Pay as you Grow.
Pay As You Grow (PAYG), which was first announced by the Chancellor of the Exchequer in September 2020, will allow firms that have started repaying their Bounce Back Loans to:
- request a loan term extension from six to ten years at the same fixed interest rate of 2.5 percent.
- By paying only interest for six months, they can lower their monthly payments. This option can be used up to three times throughout the Bounce Back Loan’s term.
- you can take a six-month payments break. This option is only available once throughout the Bounce Back Loan’s term.
- The loan is for a period of six years (the first year of this is your repayment holiday)
- Your monthly capital payment will remain the same, but you will pay less interest as the loan is paid off. As a result, your first monthly payment will be the most expensive.
Borrowers can use each of these options separately or in combination.
Borrowers should be aware that if they utilize one or more of these alternatives, they will pay more interest overall. The term of the loan will lengthen in proportion to any repayment holidays used.
How Do I Access Pay As You Grow (PYG)?
BBLS loans were initially made available to businesses in May 2020, with the first repayments due in May 2021. Three months before repayments begin, lenders will begin communicating Pay As You Grow (PAYG) options to Bounce Back Loan Scheme clients.
Customers will be informed about PAYG directly by their lenders, thus borrowers should wait until they are approached by their lender before inquiring about the scheme.
Customers will be informed about how their repayment alternatives may vary as a result of their scheme choices. Borrowers are still completely liable for the debt and are responsible for repaying their Bounce Back Loan.
MORE blogs here:
Bounce Back Loan Scheme Explained (EVERYTHING YOU MUST KNOW)
How To Successfully Apply For A Bounce Back Loan
Mistakes To Avoid With Your Bounce Back Loan