Grace (delay) in the repayment of capital means temporary suspension of regulation of the capital part of the loan installment. A grace period in the repayment of capital is a temporary suspension of the necessity to repay the principal part of the installment of a given liability, ie cash loan, at the client’s request, while the interest part of the installment is still being repaid on time .
What are the advantages of a grace period?
It is a beneficial solution for people who have been repaying their loan for a long time (in the case of fixed installments, interest is the main part of the installment at the beginning of the loan period) or they use the repayment method in decreasing installments (they then have a fixed loan period, precisely defined capital part of the installment). Thanks to the grace period, it is easier for the customer to adjust the loan to their current financial capabilities. For example, in exceptional and unexpected situations (eg loss of job), customers deciding to do so, only pay interest on the liability for an agreed period.
The grace period does not change the loan period. The capital remaining to be paid is divided into a smaller number of installments falling after the grace period. How long the loan installments can be postponed depends on each lender.
When is the grace period used?
The grace period is usually used for loans for the construction, renovation and modernization of real estate and lasts until the investment is completed. The concept of grace period also applies to insurance. Grace period is the period of validity of the insurance contract during which the insurer does not provide protection in respect of certain events covered by the insurance contract (suspends the insurance protection). Insurers use a certain grace period (from a few to several months) for certain insurance risks. Most often this concerns the risk of serious illness and hospital treatment. Its purpose is to eliminate the cases in which persons who are covered by insurance coverage are certain to take out insurance (insurance protects against future and uncertain events).