To address liquidity issues that individuals and business owners may face due to the spread of the Coronavirus pandemic and the ensuing lockdown. However, the RBI has recently instructed financial entities to grant a three-month moratorium to all borrowers/ lenders on their monthly installments or EMIS.
The EMIs would be applicable between March 1st, 2020 to March 31st, 2020. The EMIs due would be applied to a loan like personal loans and home loans. However, what you ought to remember is the grace period isn’t a repayment holiday. Instead, while you do not get blacklisted and your credit score does not take a hit, you continue to incur interest during the moratorium period.
Should you opt for an EMI moratorium? Read on to know more.
The EMI moratorium allows you to forgo your loan EMIs in March, April, and May 2020. You can continue repayment from June onwards. During the moratorium period, interest accrues on the outstanding principal, and this increases the cost of borrowing.
You Pay Higher Interest
Each EMI you forgo causes the outstanding principal to increase. Then, assuming the rate of interest remains the same, the remaining tenor is increased to keep the balance EMIs the same as they were before the moratorium. You may also have the option to pay off the accumulated interest for three months.
However, the bank will not ask for any EMI payment until May 31st 2020. However, interest will continue to accrue during these three months, which means you will be paying a higher interest cost. Also, your loan tenure will get extended by an additional three months in the long run.
Shubham Housing Finance EMI Moratorium
Based on the announcement made by the Reserve Bank of India (RBI) to allow banks and NBFCs to offer a moratorium on terms of loans and EMIs, Shubham Housing Finance has decided to provide the same to its customers. Customers can request a moratorium for unpaid EMIs that are due in March, April, and May 2020. Your loan tenor will increase as interest will be added to the interest payable and principal outstanding for the period of moratorium.
Also, remember that each bank will have its policy for dealing with this and you may need to approach the bank to avail of this moratorium for yourself specifically if you choose to take advantage of it.
It is not a WAIVER but a DEFER
As mentioned above, RBI is not waiving your three months EMI. However, it provided you with an option to defer it. Hence, no such benefit for all of you. You are just delaying your EMI.
Your Loan Tenure Will Increase By 3 months
If you opted for the three months EMI moratorium, your loan tenure would increase by three months. Suppose, if we say your loan tenure is 120 months, then it will increase to 123 months.
It is advisable for people who have a stable income and are comfortable servicing their monthly EMIs to continue doing so. In this way, you will avoid higher interest payments and longer loan tenures.
With this information at hand, you can make the right decision about opting for the EMI moratorium. If you have any more queries about the moratorium, kindly reach us at Shubham Moratorium