Loan Moratorium - To take or not to take?
Due to the current state of Malaysia facing the COVID-19 situation, Bank Negara Malaysia (BNM) has come up with some temporary measures to help with individuals' and businesses' cash flow.
One of which is the recent 6 month automatic moratorium, whereby an automatic 6 month deferment will be provided to individuals/businesses on all personal/business loans. (see: https://www.bnm.gov.my/documents/2020/FAQs_Additional%20Measures.pdf)
The good news is this puts cash back into the hands of the borrower (ie. individual / business taking up the loan); which can help with lifestyle necessities during this difficult time. The point to consider is how would the financial institution (FI) handle the owing amounts, and how would the interest compounding affect the loan in the future?
The effective date of implementation is 1st April 2020, and so there is little time to discuss it with your lender. They are making it easy to opt out of the program (most by sending SMS replies); so if you have not received any notification from your lender, it would be good to contact them before the 1st (this is NOT an April Fool's joke).
So what would be a good decision at this point in time? Here are some things to consider:
1. The moratorium is just a deferment of payment and not a waiver of payment. (technically interest can be accrued during this period, though some banks have opted NOT to charge interest)
2. Compounding interest effect can be a big burden later, and method of repayment of the 6 months deferment has not been finalised yet (will defer from bank to bank or loan contract to loan contract)
We've worked out an amortisation calculator to help review each individual's situation, so if you'd like to get a copy, do register your email with us, and we'll send you a FREE Excel calculator to you. Click on Log In and register as a new user and we can get in touch with you there.
Depending on your situation, you may or may not opt for the moratorium: as the final objective is to keep your asset (if it was a home purchase that you used the loan for); or you need the cash for your livelihood.
You can always discuss the details of the loan with your lender as loans can be discussed even after it's been effected (subject to certain limits or guidelines set out by your lender). I'd suggest giving your lender a call, even if you do opt for the moratorium to really discuss how interest will be compounded during this period, and how best to arrange a win-win scenario for the debt repayment AFTER the moratorium.
In summary, do look into it before the 1st of April 2020, as this is an automated moratorium so you need to take action if you'd prefer to maintain the repayment of your loan. We are actively online, so after getting the FREE excel sheet from us, if you'd like to run through it with one of our advisers, do drop us a PM on Facebook. (or on our contact page on our website: https://www.ecladvisory.com/contact)
We are offering a discounted fee during this MCO period in Malaysia, so do get in touch with us, and we'll get back to you on our online offers, and what we can do to help during this period of working from home.
Stay home, stay safe, and take this time to balance out your finances and cash flow. We are here for you Malaysia.