You’ve probably read the news and heard a lot about the loan moratorium. The moratorium was first introduced as an automatic option for all borrowers in April 2020.

For those of us who didn’t have emergency savings, the loan moratorium was helpful because it gave us extra cash to use for monthly expenses and bills.

In June 2021, the government announced another moratorium to help Malaysians through the current MCO. Let’s break down what’s been announced as at 6 July 2021 to help you figure out how the moratorium works and if you should take it.

What was announced?

The government announced a 6-month moratorium for loans as part of the new PEMULIH aid package. A moratorium allows you to delay loan payments for a specific period of time (without affecting your credit score).

Who can get the loan moratorium?

All borrowers from all income levels can get the moratorium. You can also take the moratorium even if you haven’t lost any income.

But, you’ll have to meet these conditions:

Your loans were approved before 1 July 2021.
You haven’t missed your monthly instalments for more than 90 days. BNM has advised that if your instalments have been outstanding for more than 90 days, you should call AKPK to get help on how to manage your financial situation.
You don’t have bankruptcy proceedings filed against you

How do you apply for the loan moratorium?

Check your bank’s website to find out how to apply.
Fill in the forms provided by the bank and accept the terms of the moratorium (you don’t have to submit any documents).
Within 5 days, the banks will automatically approve your application for the moratorium.
If the bank doesn’t approve your application and you would like to file a complaint to BNM, you can do so here or you could fill in BNM’s survey to complain.

What is being offered?

Here are the options banks are offering for the common types of loans like housing loans, personal loans and hire purchase loans:

6-month loan moratorium (payments are paused for 6 months)
50% reduction of loan instalments for 6 months (for 6 months, you’ll pay half your monthly instalment amount with the balance 50% to be paid after 6 months)

For credit cards, you have the option to convert your credit card loan to a loan with fixed repayments for 36 months at a lower interest rate (For example, CIMB offers an interest of 13 per annum%).

How will your loans be affected by the loan moratorium?

If you take the loan moratorium, your overall loan cost will increase as interest will continue to be charged during the moratorium.

Type of Loan	How will it affect you?
Fixed interest rates (Hire purchase, personal loans etc ) and Reducing balance interest rates (Housing loans etc)	The interest you’ll need to pay for your loan will grow. So your outstanding loan amount will increase due to the interest and it will take longer than 6 months to pay it off.
Credit cards	Although the monthly interest rate offered may be lower, a longer loan repayment period means you’ll probably have to pay more interest in total.

IMPORTANT: You should also know that the way your loans are affected can be different depending on your bank. The banks are supposed to clearly explain to you how the moratorium will affect your total loan cost and duration.

So, make sure to get this information from your bank before agreeing to take the moratorium.

Loan rescheduling and restructuring

Apart from the loan moratorium, banks are also offering other repayment assistance. The assistance is provided for borrowers who might not need or want to stop repaying their loans for a few months, but still need some help with loan repayments.

There are 2 types of repayment assistance:

Restructuring is when you change the type of loan or the interest rate charged.
Rescheduling your loans is when you revise your monthly payments or loan duration (the interest rate or type of loan don’t change).

To restructure or reschedule your loan, you will have to visit your bank to figure out which option will work best for you.

Be sure to get the bank to explain all the changes to your loan, such as the new interest rate, and loan duration.

Make sure you fully understand how the repayment assistance affects your monthly repayments and your total loan cost, before signing any documents!

Should you take the new loan moratorium or get loan repayment assistance?

The loan moratorium and repayment assistance are supposed to help you manage your money during the MCO.

Taking the moratorium will free up the money for your loan repayments to use for your other monthly expenses. So if you’re short on cash, taking the moratorium can be helpful.

If you sign up for repayment assistance, make sure to only extend it for the duration you need, taking on a loan for too long could mean a lot more in interest payments.

But, if you can afford it and already have emergency savings, it may be best to stick to your usual loan repayments.

Remember, if you take the moratorium you’ll still be charged interest for the months that you do not pay your loans. And if you take the repayment assistance, you could end up taking a longer time to pay off your loan.

What can you do next?

If you’d like to apply for the moratorium or repayment assistance, remember these steps:

Contact your bank to let them know you’re interested to take the moratorium/repayment assistance
Ask the bank these 5 questions before signing any new loan agreement:

When do I start repaying my loan?
How much will the new repayment be?
How long more will my loan be extended for?
How much interest in total will I have to pay?
What happens if my income is still affected after the moratorium and I can’t resume my repayments?

Each bank may have a different answer for these questions, so make sure you understand what the terms are before signing the agreement. For more advice on the loan moratorium and repayment assistance, click here.

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