Following the Reserve Bank of India’s advice, banks and finance institutions across the country are working out policies to defer retail loan payments for three months. India is in a nation-wide lockdown due to the coronavirus pandemic. It has forced several employees to work from home, but many are left without income opportunity. But how can the moratorium help bring respite, and how can you avail of it? Read on: What is a moratorium? Is everyone offering it? Think of a moratorium as a temporary postponement of EMI payments. This, however, doesn’t mean your EMI is paused for three months and resumed later without consequence. Do note that the moratorium is only an option if your lender is offering it. Don’t all banks have to comply with RBI’s advice? No, the RBI simply allowed the banks to offer a moratorium. Whether they offer it or not is left entirely up to them. However, many banks have already responded to the advice with announcements deferring payments. How can I get the 3-month relief for my loan repayment? There are two ways in which banks have enacted the moratorium: having an ‘opt-in’ service or an ‘opt-out’ service. You would have received a notification from the lender by now if you have a running loan. Most private sector banks like HDFC, ICICI and Axis bank aren’t offering a moratorium by default. You will have to opt in by responding to the communication received. If you haven't opted in for the moratorium, it's assumed that you will pay EMI as usual. A few public sector banks are offering a moratorium by default; meaning all borrowers are allowed a moratorium. Some banks which have provided automatic relief include Punjab National Bank (PNB), State Bank of India (SBI), and IDBI Bank. Here, you can opt out if you so wish. Smaller institutions such as AU Small Finance Bank and IDFC First Bank are offering moratoriums to select customers only. In such cases a moratorium is being offered upon non-payment of the April EMI. Can I opt for a moratorium on a car loan even if I have a running home or personal loan? Provided your bank is offering it, yes you can. A moratorium is offered across all term loans. If I opt for the moratorium, how much interest will I be charged? The interest depends on the loan repayment schedule. For example; Calculated EMI: Rs 15,889 Accrued Interest Range: Rs 706 - Rs 10976 After the moratorium ends, the accrued interest is added to the outstanding principal. This will be adjusted by either extending the tenure of the loan, or re-calculating the EMI while keeping the tenure intact. If I opt for the moratorium, will it lower my credit rating? No, applying for the moratorium will not affect your credit rating. But if you fail to pay after June, your credit score could be impacted. What happens if I do nothing? If you don’t opt for a moratorium and don’t pay your EMI, it counts as a missed payment and could be subject to fees. So unless your bank has provided automatic relief, you can’t ignore your loan for three months. Do I have to opt for the moratorium? If your monthly income hasn’t been impacted by the coronavirus, paying your EMIs, as usual, will allow your loan tenure to remain unchanged. Availing the moratorium will most definitely lead to an increase in EMI and/or tenure. Our advice would be to pay if you can afford to.
Principal: Rs 5 lakh
Rate of Interest: 9%
Tenure: 3 Years
