What Happens After The Loan Moratorium Ends?
The six-month moratorium ends on September 30, 2020.
This general moratorium has enabled millions of Malaysians to obtain temporary relief on loans totaling over RM 66 billion.
However, this is about to end, which means you will need to start paying the monthly payments on all of your home, auto, or other personal loans starting in October.
How does it work and what options are available if you are not ready to start paying off your loans again? Here’s what you need to know to prepare ahead.
What happens when the moratorium on loans ends?
After September 30, 2020, you should resume repaying your loans. Borrowers should contact their respective financial institutions to find out what options are available to resume payments if they have not received notification regarding the post-moratorium repayment.
The general banking moratorium had allowed all borrowers to defer loan payments from April 1, 2020 to September 30, 2020, but remember that the existing monthly interest charged for the loan amount will continue to accrue.
For residential mortgages, the unpaid interest accrued on the loan will still have to be paid after the moratorium, either by increasing the monthly payment amount or by extending the loan repayment period. However, recent interest rate cuts have also helped reduce interest payments on home loans, which could lead to lower monthly repayments.
Those with personal loans or financing, including hire-purchase commitments, will also need to extend their loan repayment period if they have signed up to the 6-month loan moratorium.
What is the 3-month moratorium extension?
If your income still hasn’t returned to normal and you’re not ready to start paying off your loans, there are several options available to help you manage your debt.
The Prime Minister announced in July that there would be a targeted extension of the moratorium and flexibility of reimbursement for those financially affected by Covid-19.
It is important to note that this extension is not automatic like the previous moratorium. Borrowers who wish to extend their moratorium on loans or reduce the amount of their monthly payments must apply directly to the bank.
If you can afford the monthly repayment now, it is better to start paying again because the longer you delay the loan period, the longer the loan period will be extended even further in the future. When it comes to home loans, the longer you delay paying off the loan while adding the monthly unpaid interest charges, the more cost of borrowing you will have to pay in the future.
Who is eligible for the extension and what are the options?
Borrowers must meet certain conditions to be allowed to apply for an extension of the moratorium or other repayment options.
|Who can apply||What options are available|
|If you lost your job in 2020 and haven’t found a new one yet||Extend the moratorium until December 31, 2020|
|You still have a job but a pay cut due to Covid-19||Reduce the loan installments in proportion to the salary reduction for a period of six months|
For example, if your salary is reduced by 30%, you can ask to reduce your loan repayment by 30%.
|Hire buyer borrowers affected by job loss or salary reduction||Extend the repayment schedule in accordance with the Hire-Purchase Act 1967 *|
* Note: The options available for repayments are different from those available under loans and financing packages
|SME borrowers and others not included in the above categories||1.pay only the interest on the loan for a while|
2. Extend the term of the loan to reduce the amount of monthly payments
3. Offer other forms of repayment flexibility until the borrower is in a more stable position
Source: Bank Negara Malaysia
To use any of these options, you need to go directly to the bank where you got the loan before the general moratorium ends in September.
Borrowers who need help renegotiating their loans can also apply to the AKPK (Agensi Kaunseling dan Pengurusan Kredit) while business owners can seek advice from the Small Debt Resolution Scheme (SDRS).
If you are having trouble repaying your loans, don’t just ignore the problem because there is a lot of risk involved. You can receive late fees from the bank and even risk having your assets seized or being declared bankrupt.
Sign up for your free iMoney CreditScore to track your loan payments and find out if you are financially healthy after the moratorium ends.
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