Covid-19, Crisis, Estonia, Financial Services, Loan

International Internet Magazine. Baltic States news & analytics Monday, 06.07.2020, 13:12

Luminor: Loan repayment grace periods taken mainly due to pay cuts

BC, Tallinn, 26.05.2020.Print version
In 70% of the cases where customers of Luminor have asked for a loan repayment grace period the cause was a reduction in the person's pay and only in 13% of cases it was the person having lost their job, Luminor said LETA/BNS.

In 17% of the cases there was no specific reason involved, with people taking a loan repayment holiday just in case. A grace period was sought primarily by people whose account balance at the moment of filing the application was smaller than 500 euros, the bank said.

Heiki Raadik, head of credit products at Luminor, said  that clients who are working or who used to work in the sectors hardest hit by the crisis, such as food services, tourism, transport, entertainment, sports, culture, and beauty services are most likely to have sought a grace period.  

The average outstanding amount of the home loan of the clients who have asked for a grace period is 68,000 euros and the average length of the repayment period is 16 years. Grace periods have been asked for the most by clients who concluded their loan agreement in 2008 or in 2016. 

"Many of the clients who asked for a grace period were not prepared for a situation like this. This means that they had practically no savings whatsoever," Raadik said, adding that almost 70% of the clients who asked for a grace period had less than 500 euros in their bank account at the moment.

He added that in case of problems, people should not adjourn approaching the bank. At present it is possible to seek a grace period for up to 12 months and no other terms or conditions of the loan agreement will be changed. 

A survey conducted in March also demonstrated that a quarter of Estonian residents have savings to support themselves just for up to one month, while the savings of 30% would suffice for up to two months, Luminor said. 

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