Deciding whether to repay a Bounce Back Loan over 6 or 10 years is a personal choice that depends on your financial situation and goals.
Repaying the loan over 6 years may be the best option if you can afford higher monthly payments and want to pay off the loan as quickly as possible to avoid paying more interest.
On the other hand, repaying the loan over 10 years may be a better option if you want to keep your monthly payments low and have more cash flow to invest in your business.
However, it’s important to note that the longer repayment period will result in paying more interest overall.
Ultimately, you should weigh the pros and cons of each repayment period and choose the option that aligns with your financial goals and capabilities. Consulting with a financial advisor may also be helpful in making an informed decision
Should I pay off my bounce-back loan over a 6 or 10 year period?
In March 2020, Bounce Back Loans became available, offering a repayment term of six years. The good news was that no payments were due for the first 12 months. However, for those who borrowed the full amount of £50,000, monthly payments of over £900 were necessary for the next five years.
This presented a significant financial burden, particularly for those whose cash flow had already been squeezed by the pandemic’s impact. Many companies found this repayment schedule unmanageable as they worked to recover from the Covid-19 fallout
What increasing your Bounce Back Loan term means for your company
Increasing the term of your Bounce Back Loan can have significant implications for your company. By extending the repayment period, you can lower your monthly payments, which can improve your cash flow and alleviate some financial stress. However, it’s important to remember that the longer your loan term, the more interest you will pay over time.
Additionally, extending your loan term means you will be in debt for a longer period, which could impact your ability to secure future financing. Before making any decisions, it’s essential to carefully consider the implications of extending your loan term and weigh the benefits against the drawbacks to make an informed decision that works best for your company.
Understanding the Pay As You Grow (PAYG) Scheme and Bounce Back Loan Extensions
The Pay As You Grow (PAYG) scheme and Bounce Back Loan Extensions are initiatives designed to help small businesses manage the financial burden of repaying their Bounce Back Loans. PAYG allows borrowers to extend their loan term from six years to ten years, reducing monthly payments by almost half. Borrowers can also choose to take a six-month repayment holiday or make interest-only payments for six months. These options can provide much-needed breathing room for small businesses that are struggling to meet their financial obligations.
Bounce Back Loan Extensions offer similar relief to small businesses. Under this initiative, borrowers can extend their loan term from six years to ten years, reducing monthly payments. Borrowers can also choose to take a six-month repayment holiday, making interest-only payments for six months, or pause their repayments altogether for up to six months.
This flexibility can help small businesses free up cash flow, enabling them to invest in their operations, pay their employees, and weather the financial storm brought on by the pandemic. Ultimately, the PAYG scheme and Bounce Back Loan Extensions provide a vital lifeline to small businesses as they navigate the uncertain economic landscape of the Covid-19 pandemic
Should I extend my Bounce Back Loan to 10 Years?
Deciding whether to extend your Bounce Back Loan to 10 years is a significant decision that should not be taken lightly. On the one hand, extending your loan term can provide immediate relief to your cash flow by lowering your monthly payments. This could be particularly helpful if you are experiencing financial difficulties due to the pandemic. Additionally, the PAYG scheme and Bounce Back Loan Extensions offer various options, such as repayment holidays and interest-only payments, that can provide further relief.
On the other hand, extending your loan term means you will be in debt for a more extended period, and ultimately pay more in interest. This could impact your ability to secure future financing or even delay your ability to pay off the loan entirely. Therefore, it’s essential to carefully consider your business’s long-term financial goals and how extending your loan term fits into that plan. You should also ensure you fully understand the implications of extending your loan and assess whether the benefits outweigh the potential drawbacks.
What if I need more help with my Bounce Back Loan?
If you are struggling and can’t pay back your Bounce Back Loan, it’s essential to communicate with your lender as soon as possible to discuss your situation. Lenders are required to work with borrowers who are experiencing financial difficulties and may be able to offer additional support, such as repayment holidays, interest-only payments, or loan extensions.
The PAYG scheme and Bounce Back Loan Extensions are also options that may provide much-needed relief. However, it’s crucial to remember that these options will ultimately increase the total amount you owe and may affect your ability to secure future financing.
If you find yourself in a position where you cannot pay back your loan, it’s essential to seek professional financial advice to understand your options fully. Bankruptcy or insolvency may be a last resort for some borrowers, but it’s crucial to explore all other options before taking this step. Ultimately, being proactive and communicating with your lender can help you find a solution that works for both parties and can help you avoid more severe financial consequences in the long run.
Frequently asked questions
Extending your bounce back loan to 10 years can provide you with a lower monthly payment and more time to repay the loan, but it may also result in paying more interest over the long term. Ultimately, the decision to extend your loan term should be based on your individual financial circumstances and repayment goals.
To extend your Bounce Back Loan (BBL) to 10 years, you will need to contact your lender and request to switch to the new Pay As You Grow repayment plan, which allows for a longer loan term and more flexible repayment options. Your lender will provide you with the necessary information and guidance to complete the process. Should I extend my bounce back loan to 10 years?
How do I extend my BBL to 10 years?
Conclusion
Deciding whether to extend your Bounce Back Loan term to 10 years is a significant decision that depends on your specific financial circumstances. Extending the loan term can provide immediate relief by lowering your monthly payments, which can be helpful if you’re experiencing financial difficulties. Additionally, the Pay As You Grow scheme and Bounce Back Loan Extensions offer options like repayment holidays and interest-only payments, which can provide further relief.
However, extending the loan term means that you will be in debt for a more extended period, which may impact your business’s ability to secure future financing or pay off the loan entirely. Additionally, it’s important to remember that the longer the loan term, the more interest you will pay over time, which could ultimately result in you paying back more than you initially borrowed. Before making a decision, it’s crucial to consider your long-term financial goals and carefully weigh the benefits and drawbacks of extending the loan term.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.