Year 2020 has been a roller coaster ride for all of us. Fortunately, the 6-month moratorium that was in effect from 1st April 2020 has helped many of us ride through the financial challenges of the COVID-19 pandemic in the last few months.
However, with the moratorium ending, what will happen to our loans after this? What do you have to do when moratorium ends? We have put together some useful information that you should know.
1. What do you have to do after the moratorium ends on 30th September 2020?
You will need to catch up with your loan repayments after moratorium ends, and the interest will continue to accrue as usual.
2. What can you do if you are not yet ready to continue paying your loans?
If you are still not in good financial position to continue paying your loans after the moratorium ends on 30th September 2020, do not worry. You have a few options:
- Reschedule your loan. This basically means extending the duration of your loan, or revising your monthly payments without changing the terms and conditions of your loan agreement, such as the type of loan or interest charged.
- Restructure your loan. This is when you need to change the terms and conditions of your loan, or the type of loan.
- Debt consolidation loan. Debt consolidation means combining more than one debt obligation into a new loan with a favourable term structure. The amount received from the new loan is used to pay off all your existing debts. However, with this option, you must make sure that you can actually afford the new loan, or you will end up back to square-one.
If you have no idea where to begin, again, do not worry. Speak directly to your bank or financial institution about your concerns, or you can approach Agensi Kaunseling dan Pengurusan Kredit (AKPK) to seek professional assistance on managing your loans or debt.
3. What happens if you don’t continue to pay your loans after the moratorium ends?
Here is what will happen if you do not continue to pay your loan instalments on time after the 6-month moratorium:
- You will end up owing a lot in interest. Interests and penalties will be charged once you start missing payments, and they will start to accumulate.
- Your credit score will be affected. When you miss payments, you will get a bad credit score. This will make it difficult for you to get other loans in the future.
- You could lose your assets. If you are not paying for the car loan, the bank or lender will take away your car. If you are not paying for your housing loan, the bank or lender will auction off your house to pay off your loan.
- You may be filed for bankruptcy. If you miss many payments, the bank or financial institution you owe money to can file for your bankruptcy. You will eventually lose all your assets, your bank accounts under your name, and you won’t be able to get a loan from any bank.
4. What is the targeted moratorium extension and repayment flexibility?
In late July 2020, BNM have announced a targeted extension of the moratorium and repayment flexibility for individuals and SMEs that continue to be affected by COVID-19 after the blanket 6-month moratorium ends on 30th September 2020.
The targeted moratorium extension and repayment flexibility will apply to the following groups:
- Individuals who have lost their jobs in 2020 and have yet to find a new job. Depending on the individual’s situation, an extension on loan moratorium for a further three months will be offered by their bank.
- Individuals who are still in employment but who have undergone pay cuts. Depending on the type of loan, their monthly instalments will be reduced in line with their salary reductions, for at least 6 months. At the end of that 6 month, the bank or institution will also consider further extending the repayment flexibility, depending on the salary of the borrower at that time.
- All SME borrowers who are affected by COVID-19. For SME borrowers, the flexibility offered by the bank will take into account the specific circumstances of the borrowers. This include
- allowing the borrower to pay only the loan interest over a period of time,
- lengthening the overall period of the loan to reduce monthly instalments, or
- provide other forms of flexibility until the borrower is able to resume full repayments.
5. How to apply for the targeted moratorium extension and repayment flexibility?
To obtain these moratorium extension and repayment flexibilities, you can apply directly to your respective banks or financial institutions beginning 7th August 2020. These repayment flexibilities provided during this period will not appear in your CCRIS reports.
After the 6-month moratorium, the thought of suddenly having to pay for your loans again may be hard to handle, so the best thing to do is to plan out your financial commitments wisely. If you are still experiencing financial difficulties, do approach AKPK or your respective banks. Be honest about your financial situation and understand the options that you have.
This article is intended to convey general information only and is accurate at the time of publishing.
All information in this article are not intended to be a source of advice. Any interested party should seek and obtain professional advice for your specific needs and situation.