With a new home loan, a loan for his car and that personal loan he took for his wedding, the bank moratorium has been helpful for Alex. But with just two months of the moratorium left and no extension expected except on a case-by-case basis, Alex will have to start paying back his loans again soon. What does he need to know?
How does the bank moratorium work?
The bank moratorium allows you to delay your loan payments from 1 April 2020 to 30 September 2020 without affecting your credit history. From October, for Malaysians who have lost their jobs, it will be extended till the 31 of December 2020. For those with a pay cut, you can apply to pay less monthly.
Here is how it applies to the common loans you may have:
Personal Loans/Financing and Hire Purchase Agreements
Usually, these loans have a flat interest rate. If you have this type of loan, there will be no extra interest charged but your loan will be extended six months, the duration of the moratorium.
Home/Mortgage loans are normally based on a reducing balance method. For this type of loan, your interest will continue to grow if you took the moratorium, and you’re likely to have to extend your loan to pay off the additional interest. Your new loan period will depend on what you agree with your bank. \
So, what happens next?
Once this moratorium is over, the safety blanket is off! You’ll no longer be protected from the possible outcomes of not repaying your loans. So, you have to continue repaying your loans.
- Hire Purchase and Personal Loans: Most of these loans have fixed/flat interest rates, so you’ll just have to continue the payments you were making before the moratorium.
- Home and Mortgage Loans: These loans usually have floating/reducing balance loans, so will be paying off your loan for more than an additional 6 months.
What can you do if you’re not ready to continue repaying your loan/s?
If you have only one loan, speak to your bank directly. If you have numerous loans, speak to Agensi Kaunselling dan Pengurusan Kredit (AKPK). AKPK could give you counselling on how to handle your loans or you could get into one of their debt management programmes.
|Reschedule||Rescheduling your loans is basically extending the duration of your loan or revising your monthly payments without changing the terms and conditions of your loan agreement such as the type of loan or interest charged.|
|Restructure||Restructuring is when you need to change the terms and conditions of your loan or the type of loan, for example from a bank overdraft to a term loan.|
|Debt consolidation loan||You take a new loan that pays off all your existing loans. Getting a loan to pay off other loans doesn’t exactly sound like the best idea. But, you’ll get to just pay off one loan with a single interest rate. Just make sure you can afford the new loan or you’ll be right where you started!|
What if you just don’t continue paying your loans after the moratorium ends?
- You’ll end up 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!
- Your credit score will be affected: 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.
- You could lose 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 your loan, you’re expected to pay the balance).
- You may be filed for bankruptcy: If you miss many payments, the bank you owe money to 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.
As you can see, there are a few ways to pay off your loans if you think you’ll have trouble continuing repayments this October, but it’s important to start planning now. So, start by calling your banks or AKPK right now to discuss your options. Don’t wait for the end of the moratorium and don’t think you should just NOT repay your loan!