Should One Opt For The Moratorium?

The government has announced the extended the loan moratorium facilities for individuals as well as SME borrowers for a period of six months from 7 July 2021.

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said that the six-month loan moratorium announced under the RM150 billion PEMULIH stimulus package will not be interest-free. However, banks would waive compounded interest and penalty charges for borrowers who take up the loan moratorium.

If the government continues to extend the loan moratorium, should one opt for them?

If your financial standings are strong, do not opt for them. There is no free lunch in this world.

While no penalty will be charged throughout this deferment – but it should be noted that borrowers will still need to pay the accrued interest after the three to six months period. Different banks will offer a few repayment options for borrowers to choose from, post moratorium.

Back in 2020, a majority were not aware as banks did not provide any notification or any options to the customers, leaving it entirely to individual’s awareness. Ultimately, borrowers ended up paying more to the banks after the loan moratorium period ended, leaving many feelings cheated and short-changed.

Think twice

At the end of the day, you wound up having to pay more interest as the interest is not suspended. Borrowers will end up worse off as they have to pay more interest/profit to the banks. Should you opt for it, please speak to your banks on the terms and conditions as well as an illustration of how much extra you have to pay should you opt for the moratorium and should you not. This will give you a clearer picture.

Perhaps, the banks should consider a real interest-free moratorium scheme so that borrowers will pay the same number of monthly repayments to the banks after the moratorium period ends.

A loan rescheduling and restructuring options to suit the specific financial circumstances of the borrower in current hard times, without the need to provide supporting documents will also be helpful to borrowers.

Although it is the responsibility of the borrowers to find out how the payment entails later on, it would be helpful if the banks, on their part, to be transparent to the borrowers and explain to them on what the repercussions or consequences should they opt for it. At least, the borrowers are prepared and ready to repay back when the moratorium period ends. This will not lead to a shock when the time comes and finger-pointing.

However, a clear note to stress is that there is absolutely no right or wrong should you opt or not opt for the moratorium. As each individual’s situation uniquely differs from one another, it is best to make a decision that suits one’s current situation at that time. Should you opt for the moratorium and if it gives a temporary relief for you to bounce back until the situation improves, then by all means go for it.

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