2020 has been a rocky ride so far as many Malaysians continue to struggle against the Covid-19 pandemic. Luckily, the government introduced several financial initiatives, including a 6-month loan moratorium that allows you to postpone paying any monthly personal loan, mortgage, car loan or business loan from 1 April 2020.
But what will happen to your loans after the moratorium period is over? We share and answer the most common post-moratorium questions and what you can do with your extra cash.
What do I have to do after the sixth month?
You will need to catch up with loan repayments after the moratorium ends and interest will continue to accrue as usual.
However, whether or not interest will be compounded is left to the respective banks to decide. Compound interest is interest that will be charged on interest. For example, if interest is compounded during this loan moratorium, you will be charged interest on the principal every month, plus interest on the accumulated interest charges.
That said, most major banks have chosen not to compound interests on conventional and Islamic loans, including CIMB Bank.
Many banks have stepped forward to offer extra relief on top of this moratorium. For example, CIMB Bank has started a relief assistance programme for our SME and credit card customers. When in doubt, contact your bank and find out how your loan will look like at the end of the moratorium.
What if I need more than 6 months?
As you know, the moratorium is automatic as long as your loan is denominated in the Malaysian currency with no overdue payments beyond 90 days (as at 1 April 2020). However, if you or your business requires a longer deferment, don’t be afraid to approach your bank representative for further assistance on how you can restructure your loan.
You can also choose to opt out of the deferment at any time. Many banks allow individual and SME customers to opt out via SMS, CIMB Bank included. Check with your bank if this is the approach they’ve taken.
What can you do with the extra cash flow?
If you have some room left after settling the necessities, focus your efforts on securing your finances for a similar situation in the future. Redirect additional cash into building an emergency fund and an investment portfolio. Investments are not only a great way to supplement your income, they also back you up if you encounter a pay cut or pay loss.
Protect your ability to pay your debts with credit insurance, which could cover unexpected incidents such as loss of income, giving you the assurance of debt repayment even if you become unemployed due to the covid-19. We can never predict an emergency, but if it does happen, at least you’ll be better prepared. Check out this list of insurance and takaful offered by CIMB Bank.
For the next months, work on building your financial resilience by taking advantage of the moratorium. While you’re at it, check out what other financial aids in the COVID-19 economic stimulus package you may be entitled to.
This article is brought to you by CIMB as part of our ongoing efforts to raise the level of financial literacy among Malaysians. Financial knowledge and understanding are key to making well-informed and meaningful financial decisions that will improve all our well-being. This, in turn, achieves CIMB’s purpose of advancing customers and society.