THE MORATORIUM POLICY- Loan EMIs & Credit cards Dues

THE MORATORIUM POLICY- Loan EMIs & Credit cards Dues

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In one of our previous blogs, we talked about how the RBI has announced a new monetary policy which includes a 3-month moratorium on all payments which are outstanding as on 1st March 2020. The Reserve bank of India allowed all the banks and NBFCs to give a 3-month moratorium on the repayment of term loans like home loans, personal loans, educational loans, consumer durable loans, automobile loans, and agricultural loans. According to the RBI, all credit card dues and loan against credit card limit obtained before or on 1st march can also be repaid after the moratorium period is over, however, any loan or credit obtained after 1st march is not covered under this policy.

Now, before you start celebrating it is particularly important to know what exactly a moratorium period is and how you can smartly use this time to save money and plan for future investments. The moratorium period is just an EMI holiday and is a common practice during normal circumstances as well.

What exactly is a moratorium period?

3 month moratorium

A moratorium period is simply an EMI holiday which allows you to have some time off before you start paying your dues. Under normal circumstances, banks can offer you a moratorium period of up to 1 year in case of Home and educational loans so that you can prepare yourself mentally and financially to pay back the borrowed amount. However, simple interest is levied on the loan amount during this time frame which is then added to the principal amount.

So, before you get excited you must know that a moratorium period is not something you can simply exploit. Instead, if you make good use of this time, and use your funds smartly, you can enjoy financial stability for a longer period.

Also Read: – RBI Monetary Policy: 3 Month Moratorium

How much time do you have to regain your financial strength?

The Reserve Bank of India (RBI) in a press conference on 27th March 2020 announced that all banks and NBFCs have been permitted to allow a 3-month moratorium on repayment of loans outstanding on March 1st, 2020.  So, there is an ample amount of time to prepare yourself financially after this lockdown ends. If you think that this just another holiday period and start taking your money for granted, then you might soon find yourself in a debt trap.

Will I be charged with interest during this moratorium?

Yes, RBI has clearly stated in their circular later that interest shall be accrued on the outstanding amount of all term loans during this moratorium period. The installments have been deferred for the time being but that is about it. Which means you will have to pay the following once this period ends:

  • Your EMIs
  • Credit card dues
  • Principle amount and interest components
  • Bullet repayments

The most important thing for you to realize is that this moratorium period comes to you at a cost, you have to pay the accrued interest of these months and will have to pay it additionally with your regular EMIs.

How should I use this time to my benefit?

 Use this time to pay off other informal debts that might be pending. Payoff for other things that you were waiting for because this is a good time to do that. If not anything else, save more money during this lockdown period so that you can prepare yourself for the additional interest amount that you must pay alongside your principle amount.

What about my credit card dues?

THE MORATORIUM POLICY- Loan EMIs & Credit cards Dues

The RBI has made it clear that your credit card dues can also be deferred during this moratorium period. Having said that, if you are a cardholder then you need to remember that this moratorium will only delay the payments for a while and the outstanding amount will continue to accrue interest for the whole moratorium period.  So, when everything ends you will have to pay a higher amount than usual.  One good thing is you can apply for credit card at the comfort of your home. If you want to credit card apply online, click here

If you do not take this seriously today, you might push yourself into a debt trap in the future, and an insolvency is very much likely, given the fact that people are not getting paid or losing their jobs during these times.

So, act smart, start saving money, start building funds, and stay financially motivated. This an excellent time to spend more time with yourself and your family, do that. Who knows you might realize an old talent that could earn you some extra bucks! 

Also read: – How to Keep Away From Financial Stress During Corona

Stay home, stay safe.

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