What happens during a holiday
You pay nothing for the agreed months, but interest still accrues on the balance. The missed interest is added to the loan and spread over the remaining payments.
That means a higher payment afterwards and more interest overall, even though the rate has not changed.
Worked example
A £18,000 balance at 7.5% with 48 months left costs £435.22 a month. After a 3-month holiday the balance is £18,339.61.
The payment rises to £468.81 and the extra interest over the loan is £205.66, taking total interest to £3,096.23.
When a holiday helps
It can bridge a short loss of income without missing payments, which protects your credit file. Ask whether the lender reports the holiday as agreed.
If the pause is long, consider extending the term instead, which spreads the cost more gently.
Inputs for the car loan deferment calculator
Balance when the holiday starts
The amount still owed when the pause begins.
Interest rate (nominal)
The yearly rate before monthly compounding.
Months left on the loan
How many payments were left before the holiday.
Payment holiday
How many months you will pay nothing.
CALCULATOR QUESTIONS
Car loan deferment calculator questions
Does a payment holiday cost money?
Yes. Interest accrues and is added to the balance, raising the payment and the total interest.
Does it affect my credit score?
An agreed holiday is usually recorded as up to date, but check with the lender.
How much more will I pay?
In the example, £205.66 extra over the life of the loan.
Can I shorten the holiday?
Often yes. Ask whether you can resume payments early without a charge.