In a bid to provide relief to borrowers due to the ongoing COVID-19 pandemic, the Reserve Bank of India (RBI) allowed lending institutions to offer a three-month moratorium on repayment of term loans and credit card dues. The moratorium period is for all payment of instalments falling between March 1, 2020 to May 31, 2020.
Following the announcement made by the Central Bank, there have a lot of questions among borrowers regarding this moratorium period. Given below are five frequently asked questions (FAQs) and their answers.
A moratorium period with respect to a term loan means a period when you don’t need to pay the equated monthly instalments or EMIs.
A moratorium shouldn’t be construed as a loan waiver. The interest will continue to accrue on the outstanding amount of the loan. Note that a loan moratorium refers to deferment of EMIs and not a concession or waiver in any form.
If you avail this facility, you will not need to make an EMI payment till May 31, 2020. While interest during the period will continue to accrue on the outstanding principal, the loan tenure will get extended by the corresponding period for which you have availed the moratorium. The extension depends on the type of loan and its residual tenure.
Note that the moratorium is applicable for all term loans, including agricultural term loan, crop loan, and loan under pool purchases. Also, not paying the EMI during the moratorium period will not affect your credit score, the three-digit score between 300-900 that lenders use to gauge your
While some banks and non-banking finance companies (NBFCs) are asking their borrowers if they would like to avail this facility or not, others are automatically ‘opting-in’ their borrowers. Therefore, you must keep a close watch on any loan-related communication from your lender.
You could also specifically reach out to your lender to find out if you need to put a request to stop auto-debit of EMIs, should you want to avail the moratorium facility. In case you don’t want to avail it and your lender has opted you in, find out how can you cancel this facility. Different lending institutions have their own processes through which you can either opt-in or opt-out from this facility.
You must adopt due diligence while adopting the moratorium facility. If there a severe disruption in your cash flow or loss in income, you can opt for it. However, if you have enough liquidity and can pay your EMIs, it makes sense not to adopt it.
Note that the interest though postponed by 3 months continues to accrue on the outstanding amount, and this could result in a high cost later. If you can afford to pay EMIs then pay it as it will help in speedy lowering of the loan burden. However, if you have decided to avail the facility, get complete clarity from your lender.
The facility is extended to credit card dues as well. However, note that interest on credit card dues are pretty high as it’s an unsecured mode of finance.
Opting for this facility could result in a significant interest outgo and therefore, you should take a decision after due diligence.
As evident, you must avail the loan moratorium facility after going through the fine print and consulting with your lender. Getting into the nitty-gritty will help you make an informed choice.
I don’t know how to take benifite of moratorium please help me in this