How to request postponing installments and what will this mean for you?

02/04/2020

Half-year postponing of repayment of loans and mortgages is approved, waiting for sanctification by the House. You have to ask to postpone the installments yourself, it will not happen automatically. Whoever wants to keep paying, he obviously can.

On April 1, 2020, the government approved a six-month postponing of repayment of loans and mortgages concluded before March 26, 2020. Debtors will have to apply to postpone the repayments. Thus the Minister of Finance's original proposal to postpone installments was not approved. The so-called moratorium will not affect loans contracted after that date, credit cards or overdrafts. The proposal still has to be sanctified by both chambers of parliament and, if approved, will be binding for all banks and non-banking companies.

It is important to point out that the Act opens the option of postponing installments for up to 6 months only for those clients who have noticed some negative economic impact of the COVID-19 pandemic and who declare this to their bank together with their request for postponing.

The Czech National Bank also considers the moratorium to be economically justified. According to the Central Bank, this will not lead to unnecessary or premature insolvencies due to the corporate, sole trader and household income shortages in connection with the coronavirus pandemic, which would cause irreversible damage to Czech economy, which would subsequently have a negative impact on the banks and other financial institutions.

The aim was to strike a balance between the needs of consumers and businesses on one hand and banks and non-banking lenders on the other hand, as it is important for both sides to maintain financial stability.

Important: This is now still a proposal that has to be approved by the Chamber of Deputies.

It will not be necessary to prove the reasons

Those who have taken out a loan or mortgage before 26 March 2020 and are interested in postponing installments must notify the bank or non-bank-borrowing company they have a loan with that they are facing the consequences of the COVID-19 epidemic. But they will not have to prove these reasons. Natural persons and companies will be able to interrupt their repayment at their discretion for either three or six months. Repayment of the repayments will be voluntary for the clients and will not involve any fees, explains Alena Schillerová, Minister of Finance.

As mentioned above, repayments will be deferred for both consumer and business loans, including mortgages that have been negotiated and drawn before 26 March 2020. For mortgages, repayments may also be suspended for contracts concluded before 26 March, if they were drawn after that date. Nor will it be possible to defer repayment for loans where the debtor has been in default of more than 30 days as at 26 March 2020.

If you use the option of postponing installments, the repayment period of the loan will be extended by a correspondingly long time. Interruption of repayment will not lead to a negative entry in the credit registers. Interest will be paid by sole traders and natural persons at the contractual level, but in the case of natural persons, they can reach the maximum statutory interest on late repo rate increased by 8 percentage points. This interest ceiling avoids the situation that the consumer would have to pay interest at a rate that would be liquidated after the end of the grace period, explains the Minister of Finance.

How to defer installments

Can't repay?

  •    You ask the creditor (bank, non-banking company) for a postponement, you choose a period of 3 months or 6 months. It's up to you.
  •    The parameters of the loan do not change! Interest is also charged for the period of interruption of the installments, only to be paid later and will have a fixed ceiling, unless the bank / non-bank voluntarily withdraws from them.
  •    Interest on late payments by consumers can now reach the maximum statutory level at the repo rate plus 8 percentage points, ie at the time of publication of the article it is max. 9% p.a.
  •    The regulation of sanctions for late payment is newly extended to loans for self-employed persons. In the event of a delay of more than 90 days, the amount of the contractual penalty shall not exceed 0.1 % of the amount due. The sum of all contractual penalties must not exceed half of the total principal. However, interest on late payments must not exceed the statutory rate (9% p.a.) after 90 days, but the self-employed have no current interest ceiling.
  •    Interruption of installments under this moratorium will not result in an entry in the credit register. In this way, you can only postpone loans and mortgages agreed up to and including 25 March 2020.
  •    The deferral applies to consumer loans (installment loans, bridging loans, building society loans) and mortgages.
  •    The deferral / moratorium does not apply to revolving loans, ie overdraft, credit card and leasing, nor does it apply to specialized loans for the capital markets (eg negotiated by Fio banka for the purchase of shares).
  •    You cannot apply a grace if you are in default of 30 days or more on March 26, 2020.

Can you repay?

  •    Nothing changes for you, continue to pay. Postponement is voluntary, not automatic.