Have opted for loan moratorium? Know how to cut costs, opted for loan moratorium? Know how to cut costs
- There was a huge loss in income due to the impact of employment during the Corona period.
- RBI gave the facility of moratorium to the borrowers.
- This facility was given to the borrowers up to the limit of Rs 25 crore.
Due to the lockdown imposed in many states to prevent the second wave of the epidemic, financial crisis has arisen for many people. Many people suffered huge loss of income due to business closure and job loss. The lifeline of borrowers at the end of the pandemic was extended by the Reserve Bank of India (RBI) in the form of Resolution Framework (RF) 2.0 announced by the central bank on May 5, 2021. This was in line with the measures announced earlier. year under RF 1.0 which made distressed borrowers eligible for loan moratorium. Moratorium refers to the deferment of the repayment which gets added to the principal amount. As the borrower starts the repayment, the repayment period and in some cases the EMI increases. These are monetary policy instruments used by central banks such as the RBI and the US Federal Reserve to protect borrowers facing financial hardship.
Governor Shaktikanta Das allowed extension of the moratorium period by two years for those who had availed it in 2020. Individual borrowers and small business owners availing restructuring of their loans under RF 1.0 for a period of less than two years were allowed to utilize the full limit of two-year window provided by the central bank.
MyMoneyMantra.com founder and MD Raj Khosla said borrowers who had opted for the moratorium between March 2020 and August 2020, but were still battling the economic impact of COVID, and wanted a total moratorium of 24 months, an additional Can apply for the period (24-X) and then apply for payment restructuring. Unpaid EMI and lenders had to find a way to recover it over the remaining life of the loan or any such scheme.
However, those borrowers who did not take advantage of the relief measures provided by the central bank in 2020 can approach lenders for restructuring their loans, provided such accounts are classified as ‘standard’ by March 21, 2021. has been done. But this facility is available to those borrowers. Whose arrears of Rs 25 crore or less. Any account that is behind in the repayment schedule for a period of 90 days or more can be classified by lenders as a ‘substandard’ account.
Who is eligible for Loan Moratorium, Restructuring?
Individuals who have taken a personal loan to their own workers other than the loan facilities provided by lending institutions; Individuals who have availed business loans up to a limit of Rs.25 crores. Small businessmen engaged in retail or wholesale business with accounts of less than Rs.25 crores. According to SBI, all loans including home loans, car loans, education loans and personal loans are eligible for the moratorium. If the same COVID-affected borrower has multiple loans, all such accounts will be eligible for the moratorium.
How can you take advantage of this?
Borrowers facing financial difficulties have the option of applying for a complete moratorium or for deferment of their dues, both interest and principal amount, for a maximum period of 24 months or two years. However, the borrower can also choose to pay only interest on the principal amount. However, borrowers should note that neither the interest nor the principal amount will be waived off during the moratorium or restructuring period. Once the repayment holiday is over, the borrower can continue with the original repayment tenure with higher EMI or can opt for the extended repayment tenure with the original EMI.
The cost increases when you choose the moratorium option
It is to be noted that opting for the moratorium will increase the liability for the borrower as the interest earned during the moratorium on the principal will have to be paid back after the moratorium period is over. Due to non-payment of dues during the moratorium period, the interest charges for the borrower will increase if the outstanding amount increases. Experts say that in order to reduce the cost of the moratorium, borrowers will continue to pay at least the interest on the outstanding amount, so that the outstanding amount is not affected.
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