Do You Still Need To Apply For The Loan Moratorium? Here’s What You Should Know
The National Security Council has announced that the Movement Control Order (MCO) will now be extended until February 18, 2021. This applies to all states except Sarawak. Earlier in January 2021, the prime minister had also announced additional Covid-19 aid.
In response, Bank Negara (BNM) has also announced that borrowers can request moratorium extensions to their existing bank loans which will not affect their credit report and the continuation of the targeted repayment assistance initiatives.
The Association of Banks in Malaysia (ABM) and the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) have also issued a joint statement to assist affected borrowers with extensions of the existing moratorium. This repayment assistance has also been extended to those affected by the devastating floods in several states.
The first six-month moratorium ended on September 30, 2020.
After September 30, 2020, you were expected to resume repayment of your loans. Borrowers should contact their respective financial institutions to find out the options available to resume payments if they have not received notification about the post-moratorium repayment.
The blanket bank moratorium had allowed all borrowers to delay loan payments but don’t forget that the existing monthly interest charged for the loan amount will still continue to add up.
For home mortgage loans, the accumulated unpaid interest on the loan will still need to be paid after the moratorium either by increasing the monthly instalment amount or extending the loan repayment period. However, the recent interest rate cuts have also helped bring down home loan interest payments and this could lead to lower monthly repayments.
What is the moratorium extension?
The prime minister had announced in July last year that there will be targeted moratorium extension and repayment flexibility for those financially affected by Covid-19. The new round of MCO in 2021 has also provided moratorium extensions for those affected.
It’s important to note that this extension is not automatic like the previous moratorium. Borrowers who want to extend their loan moratorium or reduce their monthly instalment amounts must apply directly to the bank.
If you can afford the monthly repayment now, it’s better to start paying again as the longer you delay means the loan period would be extended even more in future. As for home loans, the longer you delay paying down the loan while adding on the unpaid monthly interest charges will mean paying more in borrowing cost in future.
Who qualifies for the targeted repayment assistance (TRA)?
According to BNM, borrowers can still continue to approach their banks for tailored repayment assistance based on their specific financial circumstances. Additional repayment assistance was also made available in Budget 2021 for the B40 category.
Borrowers can refer to the special BNM microsite on pandemic-related financial assistance.
Borrowers must fulfil certain conditions to be allowed to apply for the moratorium extension or other repayment options.
- As previously announced, those who have lost their jobs, individuals and SMEs whose incomes have been affected by the pandemic can apply for the TRA.
- Additionally, for those under the B40 and microenterprise categories, they can apply to defer monthly instalments for 3 months or reduce monthly instalments by 50% for 6 months. Borrowers whose loans were approved before October 1, 2020 and do not have overdue instalments of more than 3 months are eligible.
To make use of any of these options, you must apply directly to the bank where you got the loan.
If you are having trouble repaying your loans, don’t just ignore the problem as there is a lot at risk. You may get late payments charges imposed by the bank and even risk having your assets seized or being declared a bankrupt.
Sign up for your free iMoney CreditScore to keep track of your loan repayments and find out whether you are in good financial health after the moratorium ends.
This article was originally published on September 11, 2020 and has been updated with current information.