Post Moratorium: How Should You Plan Repayment of Your Personal Loan Efficiently
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Post Moratorium: How Should You Plan Repayment of Your Personal Loan Efficiently

Post Moratorium: How Should You Plan Repayment of Your Personal Loan Efficiently

posted on 2020-09-09 06:40:29 by Admin

The loan EMI moratorium, after being extended for three months by the Reserve Bank of India (RBI), came to an end on 31 August 2020. As much as one-third of the total borrowers chose to go ahead with the loan moratorium that was initially announced in March 2020 but it is well known that not everyone claiming it was in need of the relief offered. The main motive of these people was simply to save their cash. What was predicted by earlier surveys did come true. Most of the respondents that went for the initial relief also chose to give the extended moratorium a go. Additional stress was added, as the ones who did not opt for it earlier, were suddenly claiming it in the extended period.

The growth in the total numbers of the borrowers is shown to be growing steadily throughout the moratorium period, starting from March. The working class that got salaries, initially hesitant to opt for it, but as time has passed, they have been on the receiving end of job losses and pay cuts. This has made them change their minds, especially the ones in hospitality, transportation, tourism, aviation etc.

The lockdown getting extended didn’t help the people much, so it is quite intuitive that they wanted to save their money. There are however multiple ways on how to organize your loans in an efficient manner

● Deferring personal loan was good for some in the short run during the pandemic, but for the long haul, borrowers should prioritize loans better. The loans that need to be paid for a shorter period of time, should demand relief in contrast to the longer ones because they will bear a greater cost in the future. The earlier you miss the EMI on a loan schedule, the greater is the compounded amount of unpaid interest added to the repayment.

● It was also noticed by numerous surveys that many individuals were planning to apply for instant personal loan to get over their liquidity crunch. Any expert will be quick to dismiss this because paying off a loan by another loan is a guaranteed way to fall into the vicious debt trap. The best way to deal with a cash flow crunch is to liquidate gold or small investments that you might have made. Now that the moratorium period has ended, the buyers are facing three options:

  1. 1. To pay off the interest accrued in the moratorium period in one single payment.
  2. 2. To have the accrued interest added to the loan amount and then have the EMI be accordingly adjusted.
  3. 3. To have the interest added to the loan amount and have a longer loan tenure.

If you have the resources, the first option seems very reasonable.

● Financial experts will always be of the opinion that clients should try to prepay their long term debts as soon as possible. you can either pay personal loans online or offline. You can also renegotiate the online loan (or offline) terms with your lender to reap the benefits of the reduction made by the RBI in interest rates, due to the ongoing pandemic. This is true for repo-linked loans.

● The moratorium also must not be chosen in the case of credit card bills. It is always a good idea to pay off the bill before the due date and not keep it hanging.

● Another route to save money is converting due credit card payments into EMIs, offered by many leasing credit card companies. This interest would be way lesser than the one that they charge when the credit card balance is rolled over.

● Be patient and always wait for what your bank has to say. Implementation of moratoriums was not standard across all the banks, and there was a certain amount of uncertainty amongst the borrowers. Waiting for clear communication is a must in cases like these. This is especially true for the post moratorium period. You can always reach out to them to ask for a proper restructuring plan.

● Some people are applying for personal loan online for paying up other loans, especially credit card bills that need immediate repayment. This strategy will prove a bigger problem in the long run with higher interest rates being accrued.

 

Difference between Loan Moratorium and Loan Restructuring

The major difference between the two is that loan moratorium does not require a borrower to pay their EMI and the final accrued interest gets added to the principal amount. Borrowers start repaying online loans once the moratorium period is done with. On the other hand, loan restructuring requires borrowers to repay their loans with pre decided revised terms.

Loan restructuring is the preferred route, especially in difficult economic times like these. It is not a simple process in itself as banks will thoroughly go through your credit history to allow it. Now that the moratorium period is over, make sure to not default on your EMIs so as to avoid being reported to the credit agencies. This misstep can also hamper your credit score and damage the chances of applying to new loans.

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