indicatorUnderstanding Deferrals

Loan deferrals for Albertans

How does a loan deferral work? How does deferring payments affect repayment? Here’s what to consider before deferring your personal, vehicle or RV loan.

Single-term or multi-term loan

How does the deferral work?

A deferral on a loan means that payment of both principal and interest are suspended for a defined period of time, and the amortization period on your loan is typically extended by the same number of months as your deferral period. Only extending by the number of deferred payments results in an increased final payment, as you won’t have paid all the principal and interest owing. To eliminate this final lump sum payment, we will extend your loan by a slightly greater period than your deferral period.

During the deferral period, interest still accumulates at the applicable rate, as set out in your Loan Agreement, on the outstanding principal balance. If you have life and/or disability insurance on your loan, those premiums will continue to be debited from your account to maintain your coverage.

How does repayment work?

When your loan payments resume after the end of the deferral period, we apply your payments first towards all interest accumulated during the deferral period (typically part of your payment goes towards interest and part towards your outstanding principal balance). Interest will also continue to accumulate at your applicable rate on the outstanding principal balance. Once all interest accumulated as a result of the deferral period has been paid, payments will resume being applied in accordance with the loan terms.

For example:

  • Let’s say that the interest is $100 per month and the deferral period is six months (April to September) so $600 interest accumulated during the deferral period.
    • No payments are debited from the payment account unless those payments are for life and/or disability insurance premium during the deferral period, if applicable.
  • Monthly loan payments of $500 resume in October. October’s $500 payment is applied towards interest, decreasing the accumulated interest owed from $600 to $100; $100 interest accumulates against the outstanding principal balance in October.
  • November’s $500 payment has $200 applied towards interest resulting from the deferral: the remaining $100 of accumulated interest from the deferral period, plus the additional $100 of interest accumulated in October. The remaining $300 is applied in accordance with the loan terms.

What should you consider?

Deferring payments will increase your interest costs over the life of your loan, so it's important to evaluate your financial situation and priorities before exercising this option. Please connect with us about the possible impacts of deferring your loan payments.

Repayment strategies

If you are concerned about not having sufficient funds available when your payments resume, please connect with us prior to the end of the deferral period to explore more manageable options.

To help reduce the impact of increased interest costs, you are able to repay deferred payments at any time during the term of your loan without penalty, however be sure to connect with us directly (do not use ATB Personal or mobile), so we can ensure your repayments are applied correctly.

Helpful definitions

Amortization period: The total number of years that it’ll take to pay off your loan or whole mortgage

Debit: To take out of your account

Deferral period: The defined period of time that your payments are suspended

Interest: The charges that accrue (or accumulate) over time, which are determined by applying the rate to an amount owing from time to time under a loan or line of credit

Outstanding principal balance: The current amount owing on your principal balance
Payment account: The account you designated, from which your payments are withdrawn

Principal balance: The original amount of money you borrowed

Rate: The interest rate you pay under your loan, line of credit or cardholder agreement

Secured: When you use an asset, such as your home, as collateral to secure the loan

Term: The length of time you’re committed to in the conditions set out in the loan agreement (including mortgages) or lease agreement, such as your interest rate and payment amount

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