What do we know so far about Six Months Moratorium announced by BNM?

When BNM announced the six months Moratorium on 24 March 2020, many people welcome the movement. And we here go ecstatic with the news because we know it will help lots of people out there.

If you’re late to the news, let me explain as simple as possible what is this six months Moratorium for Covid-19 affected customer or another word deferment of payment by six months.

Definition Of Six Months Moratorium

You are not required to pay any loans except for credit card between these six months, starting from 1 April 2020 until 30 September 2020.

Before this, you have to pay a monthly installment for a home loan or car loan. Now, you don’t.

For instance, if you are paying RM3000 per month for your home loan, now you can stop making this payment monthly and for the next six months.

The Advantages

1. The bank will not impose any late interest, charges, or penalties within these six months for the non-payment.
2. There will be no negative implications for your CCRIS records.

How it works ? ( For all loan financing except for credit card)

1. The application is automatic. It means you do not need to apply or fill up any form. However, if you want to opt-out of this Moratorium, you have to call up the bank.
2. You don’t need to make any payment for your loans except for credit cards where you still have to continue paying.
3. Now, the car loan that you have been paying RM500 or the home loan that you have been paying RM1300 per month, you don’t need to pay.
4. Between 1 April 2020 until 30 September 2020, you don’t need to pay the bank loans.
5. However, the interest/profit will continue to be charged on the loans/financing repayments that are deferred.
6. For example, if your home loan installment is RM3000 per month. The principal portion is RM1000, and the interest portion is RM2000. During these six months, the bank will still charge the RM2000 interest per month.
7. And these interest RM2000 will be accumulated and compounded for some banks.
8. However, at the time we’re writing this, Maybank, CIMB, Public Bank, Standard Chartered Bank, Ambank, Affin bank, HSBC, RHB, and OCBC said the interest would not be compounded. So, let see if other banks will follow suit.
9. The interest/profit will continue to accrue on loans/financing repayments that are deferred. This means the accumulated interest during the Moratorium period will be added to the outstanding loans/financing amount.
10. Meaning, if the compounded interest or interest comes to RM2000 x 6 months = RM12k or more ( because of the compounding), it will be added to the outstanding loan balance.
11. By the end of the six months moratorium, you have an option to either increase your installment or extend your repayment period. You have to discuss this with your bank later.

For Credit Card

1. You still have to make the minimum payment or continue paying.
2. If you have the difficulty of making the credit card payment, you can convert the current credit card balances to a term-loan facility for a maximum of three-year tenure with interest rate not more than 13% per annum.
3. For example, if you have RM20,000 outstanding balance in your credit card. The bank will convert this RM20,000 to a term loan with an interest rate of not more than 13% per annum. And you can choose the repayment period from one, two or three years.

Who qualifies for Six Months Moratorium

For individuals and small and medium enterprises (SMEs), the deferment in conventional loans or Islamic financing repayment (except credit cards) are automatically affected by banks if the loans/financing meet these criteria:

• The loans account is not in arrears exceeding 90 days as at 1 April 2020; and

• The loans/financing account is denominated in Malaysian Ringgit.

The Objective

1. This package is to provide some relief to individuals and businesses who face temporary financial constraints arising from the COVID-19 pandemic.
2. Many people lose their job or may not have a job after this Restriction Movement order, and even some business owners are facing tremendous losses right now and may have to struggle for the next couple of months, so this package is for them. This package is for them to get through these hard times and to sustain the business and keep the jobs.

Conclusion:

1. This package is not for you if you or your business does not affect by this COVID-19 pandemic. Meaning, you still receive your monthly income, and you can make those bank loan repayment now and in the next six months.
2. For home loans, you might able to take advantage of some banks like Maybank, CIMB, Public Bank, Standard Chartered Bank, Ambank, Affin bank, HSBC, RHB, and OCBC, which are not charging compounded interest on the loans.
3. Since, if monthly interest charges will be the same for the next six months, you can dump in the whole six months repayment by the end of 6th months before the compounded interest kicks-in on the 7th month.
4. The ideas are to keep the total installment money as a stand by in case of emergency, and if you are not going to use it, then by the end of the 6th months, you can dump in the whole six-month installment one shot. And this will reduce your home loan outstanding tremendously.
5. It almost has the same effect of paying it monthly for six months.
6. However, you must have a home loan account that allows for paying an additional amount, daily interest calculation, and before you pay the extra amount, check with your bank on the procedure, like giving notice, which accounts to dump in, get the full information about this, etc.

Home loan Tips:

1. Do not let the accumulated six months interest compounded for the whole tenure because it will have a double or triple effect on the total interest charge.
2. If the total interest charged for six months is RM10k, it can become to RM20k-RM30k by the end of tenure.

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