From April to September this year, all Malaysians received a blanket moratorium for six months which then moved to a targeted moratorium from October up till December 2020. So when Budget 2021 was announced on 6 November 2020, many of us were looking out for an announcement on the loan moratorium. Well, the Budget did bring the good news that many Malaysians were hoping for. Here are the measures outlined to help those in need manage their loans:

If you fall under the B40 category and you are registered under the Bantuan Sara Hidup or Bantuan Prihatin Nasional relief:

• Extend loan moratorium for three months, starting December 2020
  You can choose to extend your loan moratorium (with the same conditions) for an additional three months from 31 December 2020 to 31 March 2020. If you’re already on the loan moratorium until December 2020, and your loan balance is below RM150,000, the moratorium will be extended automatically for 3 months starting in January. To opt out, you will have to speak to your banks.

OR

• Pay 50% of your monthly repayment for a six-month period starting December 2020
  Alternatively, you could choose to pay less of your loans each month. Although you will be paying less towards your loans, by making these payments, you will still be reducing the amount of money you owe your bank.The overall impact of paying half your loan will depend on the type of interest rate you pay. In the case of reducing balance interest rate loans like home loans, your interest will not grow as much as it would if you don’t pay your loans at all as you are paying towards your principal. However, it will take you longer to pay off your loans than if you were paying the full amounts. For fixed interest rate loans like car loans and personal loans your interest will not change, so paying less will just increase the time it takes to pay off your loan.

If you fall under the M40 category:
You can apply for loan repayment assistance, but the terms of repayment will depend on what you agree with your bank. However, under Budget 2021, the application process has become easier. 

Before this, you would have had to prove loss of income by giving the banks a written letter, proof from your employer, your bank statements and so on. 
But from 31 December 2020, you will only need to make a self declaration (in the form of a letter) to say you’re getting less income than before the Covid-19 crisis. 

So how do you decide?

If you do fall into the categories above, ask yourself these few questions before deciding if you should take the loan moratorium. 

What do you do if you don’t fall into these categories?
If you don’t fall into any of these categories, but feel like you can’t manage your repayments, don’t panic yet. Bank Negara Malaysia has announced that banks will continue to help. On a case by case basis, if you have lost your source of income and can prove it, the banks will give you an option of extending the loan moratorium or repayment assistance.

So, regardless of which income bracket you fall in, it will be best to speak to your bank to discuss your options, or you could fill out a form on Agensi Kaunselling dan Pengurusan Kredit (AKPK)’s website to help you find the best solution for your situation. 

In general, you have two options to help manage your loans:

1. If you have one loan – speak to your bank to find out if you can restructure or reschedule your loans. Since you don’t fall into the categories above, you will have to provide documentation to prove that you are facing a loss of income. Each bank may have a different cut off date for you to send in your applications. So make sure you speak to your bank immediately!
2. If you have more than one loan – Speak to Agensi Kaunselling dan Pengurusan Kredit (AKPK). AKPK will help by providing counselling on how to manage your loans or you could join one of their debt management programmes.

And remember, not repaying your loans could lead to a lot more problems for you, such as:

• Owing a lot in interest: Once you start missing payments, there will be interest and penalties charged that will grow to become a lot of money!
• Lowering your credit score: When you miss payments, you’ll get a bad credit score which would make it difficult to get loans and even apply for services like phone lines in the future.
• Losing the assets you borrowed to pay for: If you have a car loan you’re not paying for, the banks/lenders will take away your car if you start missing payments. If you don’t continue paying your home loan, the banks/lenders will auction off your house to pay off your loan (if it’s sold for less than the money you owe, you’ll have to pay the balance). 
• Having to file for bankruptcy: If you miss many payments, your lenders can file for your bankruptcy. You’ll eventually lose your assets, your bank accounts will be deactivated, and you won’t be able to get a loan from a bank! This gets really messy, not to mention stressful. 

Also beware that even if you can restructure or reschedule your loans, you should just stick to your original loan agreement if you can afford it. Because unless you can get a better deal on the loan interest rate, you should always try to repay as much as you can in the shortest time so you can save on interest payments!