Following the uproar when it was announced by Bank Negara Malaysia and the Association of Banks Malaysia that the 6-month moratorium offered on loans, including Hire-Purchase loans, would incur interest for the 6 months, the Finance Ministry has today said that there will be no interest charged.
The announcement on the Finance Ministry’s website
Prior to this, the financial institutions had said that borrowers will have the option of settling the 5 months deferred instalments in October in one lump sum and not pay any interest, or interest for each month would be added for those who did not settle in full. This meant that the amount for the remaining instalments would be increased and the repayment term would extend a further 6 months (incorporating the deferred months). This applied to both conventional and Shariah H-P loans.
The charging on additional interest was seen as being unfair, more so at a time when many people are facing financial challenges in view of the impact of the pandemic on businesses. Allowing a 6-month deferment in paying instalments was a welcome move as it would allow them some time to recover and try to stabilize their situation, but to charge them additional interest was only adding extra financial burden.
After a discussion between the Finance Ministry and the banks, it was agreed that no interest will be charged or compounded, and therefore the amount owing would not change. In other words, whatever instalment amount has been paid will be maintained and the only difference will be that the repayment term will continue for 6 months after the original month it was supposed to end.
Borrowers have the option of accepting the 6-month deferment or they can opt out. In either case, they need to inform their banks of their decision.
