What to do: Moratorium Edition
2020 has surely been an eventful year, and it’s not even over. We are surely done with this year and if we could just skip to 2021, we would. From the forest fires to the deadly virus that has literally brought the whole world to a stop, 2020 is nothing but miserable. And for those who are affected financially by this pandemic, do not fret, because behind every dark cloud, is a silver lining. For those who do not know, Bank Negara Malaysia (BNM) granted a moratorium on loan repayments (including hire purchase or more commonly known as car loans) for 6 months from the 1st April to 31st September 2020. This is done to relieve those who are going through temporal financial constraints during these unprecedented times.
But what does moratorium mean? It is a temporary suspension of an activity or law until future consideration allows the lifting of the suspension – if and when the issue has been resolved. A moratorium is usually imposed by a government, by the regulators or by a business itself and is often placed in response to help those who are in temporary financial hardship due to (in this case) a pandemic.
When Covid-19 started affecting the livelihood of many individuals by salary cuts, forced unpaid leaves and retrenchments, Bank Negara Malaysia decided to make things easier for everyone by announcing the 6 months moratorium on personal loans and financing an initiative under the Prihatin Rakyat Economic Stimulus Package, as announced by our prime minister.
So, in simple terms, from April to September 2020, you do not need to worry about your monthly loan payments and the banks will not penalize you for it. As the country starts recovering after the MCO, the government also decided to extend the moratorium period for another 3 months till the end of the year for a few targeted groups:
- Individuals that have lost a job and is still looking for one
- Individuals that have their salary deducted due to Covid-19
How are Car Loans Affected?
But for those who were confused about the various statements about the additional interest that would be charged for hire purchase loans or car loans, on May 6th the Finance Minister himself announced that no additional charges will be applied to deferred instalment payment during the entire six month moratorium period (meaning you will still continue paying the same amount, just extended by another 6 months).
Now that the 6th month is coming to an end, what do you need to do now? For those who have chosen to take up the moratorium in April and will not be extending it until the end of the year, you have two options.
- Pay off the 6 months loan moratorium in a lump sum
Though accrued charges will not be charged whether you decide to pay off in one large sum or to continue with your installment at your usual amount, paying it off will help you cover not only the pending loan, but also the ever increasing interest. If your finances were not affected by the pandemic, you should count your blessings and pay up with the money that you have saved.
Take the loan moratorium and extend loan tenure by 6 months
For those with finances that were impacted by Covid-19, your best option is to conserve your cash flow and yet do not have to worry about the additional interest. After the 6 months, you will continue the same monthly repayment amount, but your loan tenure will be extended by 6 months, without any additional interest accrued.
For example, if you were paying RM 300 (including interest) and your car payment is supposed to end in Sept 2020, you will pay RM 300(including interest) in October 2020 and your loan will end in March 2021.
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