What Is a Grace Period?

The grace period is the period during which the debt is repaid. When a loan is used for a construction project, and the source of repayment funds is based on the income obtained after the project is put into operation, in this case, there is no repayment fund source during the construction of the project, even in the initial stage of production. Agree on a time to delay the repayment. In foreign capital projects, the borrowed foreign exchange needs to be repaid by exporting the products produced. Therefore, it takes a considerable amount of time to earn foreign exchange after the project is put into production. This is in determining the length of the grace period. very important. Although the debt may not be repaid during the grace period, according to international customary loan programs (withdrawn funds), the interest is paid to the lender every 6 months after borrowing, which means that the grace period only applies In delaying the repayment of principal. The interest payment every six months during the grace period requires the borrower to find another source of foreign exchange funds. One method is to capitalize the interest. Adding the interest paid every six months to the total loan will increase the total loan. The use of this method requires the prior consent of the competent authority. ^[1]

Grace period

(Economic and Financial Terms)

Right!

The grace period is the period during which the debt is repaid. When a loan is used for a construction project, and the source of repayment funds is based on the income obtained after the project is put into operation, in this case, there is no repayment fund source during the construction of the project, even in the initial stage of production Agree on a time to delay the repayment. In foreign capital projects, the borrowed foreign exchange needs to be repaid by exporting the products produced. Therefore, it takes a considerable amount of time to earn foreign exchange after the project is put into production. This is in determining the length of the grace period very important. Although the debt may not be repaid during the grace period, according to international customary loans (withdrawn funds), the interest is paid to the lender every 6 months after borrowing, which means that the grace period only applies In delaying the repayment of principal. The interest payment every six months during the grace period requires the borrower to find another source of foreign exchange funds. One method is to capitalize the interest. Adding the interest paid every six months to the total loan will increase the total loan. The use of this method requires the prior consent of the competent authority. ^[1]

Grace Period

Grace

Grace period

After the mortgage is issued, the borrower only needs to pay monthly interest during the period agreed in the contract, and the loan principal will not be returned for the time being. After the grace period ends, the loan amount will be repaid in accordance with the contract's principal amount or principal and interest method. Grace periods vary from 1 year (12 periods), 2 years (24 periods), and 3 years (36 periods).

For example, if a buyer applies for a 500,000 yuan, 10-year loan, if the grace period is 1 year, the loan period is 11 years (10 years + 1 year), and the loan issuance date is November 15, 2006. From that date, the first interest payment will be made on December 20, and the last interest payment will be made on December 20, 2007. During this period, the borrower only pays interest and does not repay the principal. After the 12-year term expires, the borrower starts to repay the principal and interest, and the monthly repayments have increased significantly. This method of repayment can greatly reduce the pressure of repayment in the early stage, and is particularly suitable for buyers who run out of savings when buying a house, but also have insufficient financial strength such as decoration and weddings, and have a good income prospect in the later stage.