It is likely that you have heard this term in the financial field and have wondered what is a grace period and what is it for?
What is the grace period?
The grace period, when it comes to loans, is a period of time where you should not meet your payment commitments. That is, in that period of grace or lack you will not have to pay your fees.
In general, it is very common for loan companies to use these grace periods (also known as grace periods) as a way to attract clients. However, this term goes beyond an offer. Next we will explain its operation.
Grace period on a loan
When you apply for a loan, the first thing you should do is sign a contract. It establishes the conditions and terms of financing. Within the clauses of the agreement the period of lack must be established, which is the period of time where you will not have to pay the total or part of the installments of your financing.
For example, when you ask for a loan to buy a car, the entity may offer you to apply for your credit today and start paying in two months. Those two months would be the grace period.
The grace of a loan can be:
Total grace of a loan
In this way once you request the period of lack, you will not have to comply with the payment of your fees or interest for a certain time.
This time is usually previously established in the contract as part of the payment agreement and can be from a few days to a few months.
Partial grace of a loan
This alternative allows you to pay during this grace period only part of your financial commitments. For example, pay only your financing interest for a certain time.
It is a convenient alternative for those facing temporary situations, where it is more advantageous to pay a lower fee.
When and how to request a grace period
You can request a period of lack in a mortgage or consumer loan, at the time you are going through a momentary financial imbalance, or when you need to allocate the money to other commitments.
For example, when you buy a property on credit it is common to request the grace period at the beginning, in order to cover the home remodeling.
To request a grace period, everything will depend on the credit institution and the financing conditions established in the contract.
Usually, this period is requested at the beginning, although some companies give you the freedom to request it at any time, as long as you inform the entity that you want to start with the grace period.