Moratorium Scheme – A Beneficial Impact On Loan Repayment

By: Akmal Khan0 comments

Moratorium period refers to the period of time during which you need not pay an EMI on the loan taken. The Reserve Bank of India had declared a welcome relief announcing a move to allow banks and other financial or lending institutions to offer a three-month moratorium on repayment of all term loans, especially to enable the borrowers to overcome the economic fallout from COVID-19.

  • The central bank had announced that lenders, such as banks or housing finance companies or NBFCs, would be permitted to allow to defer repayments for up to three months, which is further extended to three months.
  • The loans covered include personal loans, term loans, housing loans, car loans, as well as credit card dues. 
  • The deferral would be decided upon by the financial institutions based on its policies.

Who must apply for the Moratorium scheme? 

The individual borrowers who do not have large cash reserves set aside as an emergency corpus, or who don’t have absolute certainty about their income for the coming months, should opt for the moratorium.

The loan amount continues to accrue moratorium interest during the moratorium period, repaying the moratorium interest loan amount within the moratorium period will help you reduce your interest cost on moratorium interest amount when you will start paying back your EMIs. So, one should opt it only if there is a genuine need.

The scheme has the benefit – 

  • The businesses and companies with cash flow mismatching their disrupted supply chains and decreased demands could leverage. 
  • Individual borrowers who are experiencing liquidity issues and expect financial uncertainties in the near future, especially those dependent on the sectors that are worst impacted, can use the relief to stay afloat.
  • Availing of the deferment will have no impact on your credit score.
  • Alleviate the financial stress on borrowers’ facing income uncertainty amid the ongoing COVID-19 crisis.

Win-Win for both Investors and Borrowers 

A moratorium would be helpful to both investors and borrowers operating with P2P lending; on both humanitarian as well as the financial ground. If borrowers will have less or no salary during this period, it will default and put investors principal at risk. Hence if borrowers opt for a moratorium, they will continue paying interest amount and the investors will continue earning their monthly returns. Once the borrower gets his/her salary/income in the coming months, he/she will pay the complete EMIs. This way, the risk of investors’ principal investment goes down against the situation when borrowers will not get this option. 

Taking the fullest advantage of the RBI imposed Moratorium scheme will benefit in a sure way especially during these stressful times which will also aid an individual to manage his/her finances in a better way for the coming days. 

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