During the lockdown, the RBI announced a ready moratorium. This was essentially extended until the end of September. But while the jury is still out on (literally) whether there will be interest on deferred IMEs and whether there will be a further extension, we’ve spoken to experts about whether you should go for a moratorium.
The Reserve Bank of India (RBI) originally announced the moratorium on loans from March 1 to May 31. It was extended until August 31 and, although the matter is still before the Supreme Court, he allowed the extension until September 30. moratorium allows you to defer loan payments (including credit card) between this period. The aim was to reduce the burden that the pandemic would place on economic activity and cash flow. But the question remains: should we opt for it or obtain an extension of the moratorium on loans?
Credit report will be affected
“If you can afford it, then definitely not,” says Ashwin Bhakuni, senior product manager, personal loan and insurance, IndiaLends. He explains that apart from interest rates, solvency plays an important role in the future. “While the moratorium will not affect your credit scores for the mandated period, it will be reflected on your credit report reported to the bureaus.”
An individual’s creditworthiness plays an important role in the lending policies of banks towards you. Essentially, your propensity to pull back will translate into great interest rates and credit offers. “Loan policies can and will take your credit history into account when granting future credit. In fact, some lender policies already are. In the future, clients who now opt for a moratorium will become very risky for lenders, especially for private, state-owned and financially sound banks, ”Bhakuni warns.
Moratorium does not mean waiver of interest
“A restructuring of loans, following the end of the moratorium regime [when it is notified] is under construction. This will help clients manage cash flow for the next two years. However, you should not confuse this with a waiver of interest, ”says Subramanya SV (Subu), co-founder and CEO of Fisdom.
The Supreme Court will also hear the plea on the waiver of interest during the moratorium period. But until this is clarified or canceled, you will have to pay the interest on the deferral EMI. “Neither moratorium nor restructuring equates to giving up interest at this stage. The client must always bear the interest for the period, ”adds Subu.
Like Bhakuni, Subu also believes it’s best to avoid a moratorium if you can. Be able to pay. “Our view is that, whenever possible, customers should pay their IMEs on time so that the interest component does not blow away. It also helps keep your credit history clean for future loans, ”Subu adds.
All images: Courtesy of Getty
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