Should You Take the 6-Month Loan Moratorium?
Update– On 6 May 2020, the Ministry of Finance announced that banks should not be charging you interest on hire purchase and Islamic financing loans during the moratorium. If your bank is going to charge you interest, do contact Bank Negara Malaysia via their hotline at 03- 21741717.
Bank Negara Malaysia (BNM) announced an automatic six-month moratorium on all bank loans (except credit card balances) to all individuals and SMEs. If you’ve had to take a pay cut or go on unpaid leave during the Movement Control Order (MCO), making cash a bit short, this moratorium will help with your worries about meeting your monthly loan repayments.
What is a moratorium?
A moratorium allows you to delay loan payments for a specific period of time without affecting your credit history. In this case, from 1 April 2020 to 30 September 2020.
What’s the criteria?
● Your loan payment must not be overdue by 90 days or more as at 1 April 2020.
● The loan must be in Malaysian Ringgit.
Some conditions may vary between banks, so it’s best you call your individual banks and speak to them directly.
This moratorium is applied automatically, so if you decide not to take it, you’ll have to let your bank know. Check with your bank on how to opt out.
Which banks are offering the moratorium?
All Malaysian banks and foreign banks in Malaysia will be giving the moratorium. But if your personal loan/hire purchase agreement is not from a bank, the moratorium may not apply to you. In this case, check with your loan provider.
What loans do the moratorium apply to?
With most banks, the moratorium applies to all conventional loans or Islamic financing for individuals and SMEs.
How will the moratorium affect your loan?
Let’s go through the most common loans you may have:
Personal Loans/Financing and Hire Purchase Agreements
Most personal loans and hire purchase agreements are based on flat interest rates.
For flat interest rates agreements, taking the moratorium would mean:
● No additional interest charged.
● A loan extension for the same number of months as the moratorium.
(You can learn more about flat interest rates here).
Home loans are usually calculated using a reducing balance method.
For reducing balance loans, taking the moratorium would mean:
● Your interest will continue to grow
● You can extend your loan by more than six months to pay the additional interest
(You can learn more about reducing balance loans here).
If you take the moratorium for your home loan, there are a few options to manage your repayments after the moratorium ends. Speak to your bank to discuss these options.
Moratorium Yes or No?
If you can afford it and already have an emergency fund, it may be best to opt out of the moratorium and continue repaying your loans as usual. However, if you’re short on cash, taking the moratorium will lighten your financial burden and help you with your daily expenses during the MCO.
If you need help calculating your home loan again, you can use our home loan calculator.
For more information on the moratorium, you can also refer to BNM’s FAQs.