These are tough times for everyone and conserving cash and savings is important because we don’t know how long this situation will continue. In a normal recession, there comes a time when it ends and the economy slowly picks up again but this time, this is not something to do with the economy. It’s a pandemic which has to be fought like a war and hopefully, mankind will win and defeat the enemy.
For those who have hire-purchase loans from banks for their vehicles, you would normally have to continue paying the monthly instalments. So a portion of the money you are trying to save for essentials still has to be set aside to meet this commitment, otherwise your vehicle gets repossessed.
Understanding the burden on many people, Bank Negara Malaysia (BNM) has directed all banks to automatically allow a 6-month moratorium on loans (ringgit-denominated) being serviced by individuals and SMEs (Small & Medium Enterprises) from April 1, 2020. This means that instalments for the months of April, May, June, July, August and September 2020 need not be paid as scheduled.
It does not mean that you get the 6 months deducted as you will have to resume paying from October onwards and your repayment period will end 6 months later than the original ending month.
You will not be charged any penalty for late payment during the 6 months but according to a BNM FAQ, the interest for the month will still be charged. So at the end of the loan term, you will have an extra amount to settle which was not present at the start when you took your loan.
If you have set monthly deductions from your bank account to pay instalments automatically, deductions will not be made during the period (but check with your bank to confirm).
“Banking institutions should provide individuals and SME borrowers with adequate information on how the suspended loan/financing repayments/payments will be treated during the moratorium period,” BMM said.
From what we understand, no application is needed as the deferment will be automatic and is applicable to loans or financing that are not in arrears exceeding 90 days as at April 1, 2020. Credit card balances are not covered under this moratorium although it may be possible to discuss with your bank about rescheduling payments or converting to loans.
So you have some extra money in the coming months. Do spend it wisely on essentials and don’t go on a ‘shopping trip’ online! If you do not wish to defer your instalments, you should notify your bank.