What are the important things that you need to know about EMI Moratorium?

In the COVID-19 crisis, RBI has a relief for borrowers by allowing a moratorium of 3 months on EMI installments from 1st March to 31st May 2020.

What is Moratorium period means?

To overcome the COVID-19 crisis, as a measure of harmony, Reserve Bank of India on March 27, announced all Indian Financial Institutions to provide its customers up to 3 months moratorium on the EMI payments falling due between 1st March 2020 and 31st May 2020.

As per the RBI, the deferred installments under the moratorium will include principal and/or interest components, equated monthly installments (EMIs), lump sum repayments, and credit card dues. Every financial lender in India has set its own rules for providing a 3-month moratorium; however, the call has to be taken by the borrower. For instance, if you have enough cash flow then it is suggested not to avail for this moratorium. You must opt for it only if you are facing a cash-flow problem.

Opting for 3-months moratorium on their EMIs

If you choose EMI moratorium, then you will have to inform the bank regarding the same via mail. Once the bank is being instructed, the bank will not ask for any EMI payment until May 31st, 2020. However, one must know that the interest on your EMI will continue to accrue on the principal outstanding for the period of the moratorium at the contracted rate of the loan.

It’s just that tenure of your loan which will get extended by the corresponding period for which the moratorium has been availed. If you want to opt for this relief package, you need to instruct the bank for the same. EMI moratorium is benefitted to any kind of loans such as vehicle loans, home loans, agricultural term loan, personal loans as well as crop loans.

The moratorium is for payment of EMI, not on interest

Under the relief package, the Indian government has instructed lenders to give borrowers a grace period of three months, i.e. for March, April, and May you need not pay the EMI. But, this does not mean that three month’s EMI has been waived.

Moreover, the banks would probably charge interest for three months on the unpaid amount. But, these decisions may vary depending upon banks and individual borrowers. Some financial institutes may choose to extend the loan tenure. Others may look for a lump sum payment in June or increase the EMI from June onwards.

Credit card balance

In the case of credit cards, the accretion of interest gets tricky. You will also get a three month grace period on dues payable on credit cards, but the interest cost of this delay could well be astronomical. In normal times, one can concede a payment by paying 5% of the due amount while the rest unpaid amount is carried forward to the next billing cycle, charging 2-4% interest. Under EMI moratorium, if you do not pay three months and the bank decides to charge as it normally does, the accumulative interest could be unaffordable at more than 6-12%.

From the above scenario, you must have got cleared that the customers with adequate balance should continue paying EMIs. Doing so can help you in providing the extra interest charges and tenure extension. However, if you are already facing financial issues due to the COVID-19 crisis, you can opt for the relief package by informing to the respective banks.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. Propertypistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.

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