Repayment holiday remorse

In 2019, Wendy took out a loan. Wendy agreed to pay the loan back over three years via monthly loan repayments. Wendy had no problem meeting her repayment obligations initially, but in March 2020 New Zealand went into lockdown and Wendy’s salary was reduced by 50%.

Wendy contacted her lender to let them know that she was in financial hardship due to her reduced salary, and she applied for a ‘repayment holiday’ because she was not going to be able to make her monthly payments.

The lender offered Wendy a 3-month repayment holiday and wrote to her explaining that her repayments would change once the repayment holiday ended. Under the new repayment schedule, the term of Wendy’s loan was extended by ten months, and she was charged additional interest. Wendy agreed to all of the new contract terms.

Later in the year, Wendy looked at her new repayment schedule and noticed that her first four loan repayments after the repayment holiday ended went towards paying interest only.

Wendy wasn’t happy about the additional interest, so she asked the lender to reinstate the original loan terms. The lender said that the new loan terms were legally binding, so they were unable to change them back to how they were before the loan holiday.

Wendy complained to FSCL.


Wendy wanted the lender to reinstate loan term and the repayment schedule to how it had been before the repayment holiday because she was unhappy about the additional interest that accrued.

The lender was not willing to reinstate the original contract terms. The lender said that they had explained the new contract terms to Wendy, and that she had agreed to those terms and new repayment schedule.


We noted that the lender had responded reasonably to Wendy’s hardship application by granting her a 3-month loan repayment holiday when she needed it.

We were satisfied that the lender had clearly explained the changes that would be made to Wendy’s loan contract, and they gave her the choice to accept the variations or not.

Although the repayment holiday meant Wendy’s loan term was extended and that Wendy would pay more interest on the loan in total, we could see that Wendy had agreed to the new contract terms. We told Wendy that we could not see any grounds for asking the lender to reinstate the loan to how it had been before the repayment holiday.

We also saw that the lender told Wendy that her loan would still accrue interest whilst the repayment holiday was in place, and that they had recommended that she make any payments she could afford towards the loan during the holiday period.

We noticed that Wendy had overestimated the amount of interest that was charged during the repayment holiday, so we explained to Wendy how the interest charges on her loan were applied.


Wendy had a few questions about our decision, but she accepted that she had agreed to the loan variations. After discussing with us how her loan interest was charged, Wendy agreed to discontinue her complaint.

Insights for consumers

A borrower can request a loan repayment deferral or holiday if they find themselves in a position of unforeseen financial hardship, and their lender must fairly assess their application.

Interest will usually continue to accrue whilst a repayment holiday is in place, so the borrower will wind up paying more money back to the lender in total. Typically, the loan term will be extended as a result of the loan repayment holiday, meaning the borrower will be paying the loan back for longer than they had originally planned.

A loan repayment holiday (postponing repayments) for a short period may be a helpful way to deal with unexpected financial stress, but borrowers need to be mindful of the consequences of doing this.