Banks' rules on grace periods to remain in force until end of September

Erki Kilu, the head of Estonian Bank Association
Erki Kilu, the head of Estonian Bank Association Source: ERR

The common rules for granting grace periods agreed by Estonian banks in the spring and originally intended to be valid until the end of June will remain in force until September 30.

The rules were established for both individuals and companies in order to support the smoothest possible recovery of the Estonian economy and households from the sudden crisis situation. They have been extended because banks want to continue to offer customers the confidence that they will be treated in the same way as those who have applied for a grace period due to the spread of the coronavirus so far, the Estonian Banking Association said.

"Although the momentum of applying for grace periods decreased after the initial high interest by the end of May, there is still no certainty today that the crisis is over for Estonian people and companies. There is cause for concern that some sectors will not be fully affected by the coronavirus and the emergency situation until the fall," Erki Kilu, head of the Estonian Banking Association (Eesti Pangaliit), said.

Kilu said that it is, therefore, necessary to provide for the possibility to be granted a grace period under a simplified procedure and on similar grounds in the future as well.

As of the end of May, Estonian banks had granted grace periods due to the coronavirus crisis to 38,000 customers, of whom around 30,000 were individuals and the rest companies. Loan repayments have been deferred on loans to the extent of €3 billion.

The grace period procedure regulates the suspension of payments of the principal amount of the loan by changing the payment schedule. Upon the customer's request, the loan repayment term is also extended by the length of the grace period.

In the banks that have joined the grace period agreement, only the payment schedule is changed in the loan agreement of the grace period applicant, no other terms and conditions are changed. Loan agreements may be accompanied by guarantees from state guarantee programs received through Kredex and the Rural Development Foundation (Maaelu Edendamise Sihtasutus).

You can apply for a grace period in the case of corporate loans, housing loans, leasing, and consumer finance agreements. The length of the grace period is up to 12 months for housing loans and up to six months for leasing and consumer loans.

Companies or groups of companies with a total credit limit of fewer than €5 million in one bank can receive a grace period for the principal amount of the loans for up to six months. Operating leases are not covered by the agreement, but can be converted to finance leases if desired.

The common procedure for granting grace periods due to the emergency situation applies to loan agreements entered into before March 12 and on the basis of which grace periods can be applied for no later than September 29. Under the common rules, customers who did not have problems repaying the loan before the payment leave scheme was applied can apply for a grace period. People need to contact their bank in order to get a grace period.

Banks will advise the customer on finding the best solution. The Banking Association advises people in difficult situations to contact their bank's customer manager or customer service before incurring debts in order to find a solution to prevent problems as soon as possible.


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Editor: Katriin Eikin Sein

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