How Repayment Holidays Work on Secured Loans
A repayment holiday is an agreement between you and your lender to pause your monthly payments for a defined period — typically one to three months. During this period you are not making payments, but the loan does not disappear. Interest continues to accrue on the full outstanding balance every day of the holiday. At the end of the agreed break, you resume payments, but the total amount you owe is higher than when you stopped.
Lenders handle the accrued interest in one of two ways. Some add the missed payments (capital plus interest) to the outstanding loan balance — this is called capitalisation. Your balance is higher after the holiday, and future monthly payments are marginally increased to account for it, or the term is extended by the number of months equivalent to the debt added. Other lenders extend the loan term instead of increasing the balance, keeping the monthly payment the same but requiring additional months of payment at the end of the original term.
It is important to understand that a repayment holiday is not free money. The interest clock does not pause — it runs throughout. On a £50,000 loan at 8% annually, three months of accrued interest represents approximately £1,000 added to your debt during the holiday. Over the remaining term of the loan, that additional £1,000 will itself accrue interest, meaning the true cost of a three-month break is modestly higher than the simple interest calculation suggests.
Which Lenders Offer Payment Breaks
Not every secured loan lender offers repayment holidays as a standard product feature. Those that do tend to advertise the facility as part of their flexibility offering, but availability in practice depends on your account status, your reason for requesting the break, and the lender's current policy. Together Money and some other specialist lenders have been known to consider payment breaks for borrowers in genuine short-term financial difficulty.
It is worth distinguishing between a contractual repayment holiday (built into the product terms and available on demand up to a specified number of times) and a discretionary payment deferral (agreed on a case-by-case basis as a forbearance measure). The former is straightforward to access; the latter requires a conversation with the lender and a demonstration of need.
If your lender does not offer a formal payment holiday, this does not mean you are without options in a financial difficulty. The FCA Consumer Duty requires all regulated lenders to treat customers experiencing financial difficulty with fairness and to explore appropriate support measures. This might include a temporary arrangement to pay a reduced amount, a formal forbearance agreement, or an extended term to reduce monthly commitments.
