Equipment financing loan and lease deferrals
How does an equipment financing loan or lease deferral work? How does it affect repayment? Here’s what to consider before deferring your equipment financing.
How does the deferral work?
A deferral on an equipment financing 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 extended by the same number of months as your deferral period. During this time, 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.
A deferral on an equipment financing lease means that the monthly lease payment is suspended for a defined period of time and the lease is extended by the same number of months as your deferral period.
How does repayment work?
When your payments resume after the end of the deferral period, your payments will continue as per the existing payment arrangement. 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 your loan terms.
Also, despite the amortization period being extended by the same number of months as the deferral period, the last payment of your term will increase. This increase is a result of the deferred payments, as you will not have paid all the principal and interest owing by the end of the amortization period of your loan.
When your lease payments resume after the end of the deferral period, your payments will continue as per the existing lease payment arrangement. Despite the lease being extended by the same number of months as the deferral period, there will be additional costs as a result of the deferred payments, and these costs will be added to the purchase option due at the end of the lease agreement.
What should you consider?
Deferring payments may significantly increase your interest costs over the life of your loan and/or lease, so it's important to evaluate your financial situation and priorities before exercising this option. Please discuss with us what deferring your payments may cost.
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 and/or lease without penalty. Please connect with us directly to repay any deferred payments early, so we can ensure they’re applied correctly.
Amortization period: The total number of years that it’ll take to pay off your loan
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, line of credit or lease agreement
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, lease, 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 or lease agreement, such as your interest rate and payment amount
Our Client Care team will be happy to assist.