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4 Things You Need to Know About BNM’s Loan Repayment Moratorium

Updated 30 Jul 2020 – By Nisya Aziz


We don’t know who pisses 2020 off as things have been going a little haywire - financially speaking - especially during this COVID-19 pandemic. It’s just not cute.

So, to help soften the financial impact on the rakyat, the Malaysian government has decided in March 2020 to provide monthly financial aid of RM600 from SOCSO to employees on forced unpaid leave and allow RM500 withdrawal from EPF.

At the same time, Bank Negara Malaysia (BNM) has ordered all banks to grant an automatic six-month moratorium (deferment) of all loan/financing repayments (including hire purchase) from April to September 2020. It is to provide some relief to individuals and businesses who face temporary financial constraints arising from the global pandemic.

In short, you don't need to make any repayment during this time.


As the country recovers, the government also decided to extend the moratorium period for a few targeted groups:

  • Individuals that have lost a job and still looking for one: Will get moratorium extension for another 3 months. Further extension after December 2020 is depending on a case-to-case basis.

  • Individuals that have their salary deducted due to COVID-19: The loan repayment will be aligned with the salary reduction, depending on the type of financing. You can pay the adjusted loan repayment for 6 months. Banks can consider further extension but depends on your current salary.

Besides that, banks also ada offer repayment flexibility to other individuals and all SME borrowers. Taking into the specific circumstances of each borrower, banks can:

  • Allow borrowers to pay only the interest portion of the loan over a period of time

  • Lengthening the overall period of the loan to reduce monthly instalments

  • Provide other forms of flexibility until a borrower is in a more stable position to resume repayments in full.

As for hire purchase financing, affected borrowers will be offered revised instalment schedules that are consistent with the Hire-Purchase Act 1967. Isn’t that great?

Now, before you hippity hip hooray, please understand what BNM’s Loan Repayment Moratorium is about and the consequences that come with it.

 

1. Used to be automatic but now need to call k!


Before this, don’t have to pening one... all individual and SME with conventional loans or Islamic financing repayment obligations that meet below criteria will automatically qualify for the loan deferment:

  • No defaulted loan repayment for more than 90 days as at 1 April 2020 (you’re advised to approach your banks to seek assistance if you have);

  • Denominated in Malaysian Ringgit.

Meanwhile, if you’re one of the corporate borrowers/customers, you may request for a moratorium on loan/financing repayment from your respective banks.

As for those who don’t want to partake the automatic deferment package and want to continue to make timely and full repayment of your loan/financing, please respond to the notification sent by the bank or talk to your bank about it.

HOWEVER, with the targeted extension, you’ll need to contact your respective bank beginning 7 August 2020. No worries for those that have loans with multiple banks, you can drop by to the relevant “one-stop" centre to work out an appropriate assistance package:

  • Individuals: Agensi Kaunseling dan Pengurusan Kredit (AKPK)

  • SMEs: Small Debt Resolution Scheme (SDRS)

 

2. You will pay more interest by deferring your loan.

Although the banks aren’t allowed to impose late penalty charges on the deferred amount, interest still jalan, you know. Because… banks still need to make money maaa. So, this is something you’ll need to think about because it only means that you’re going to fork out more money later. 




Here’s the breakdown:
  • Conventional loans: The interest will continue to be charged on the outstanding balance comprising of both principal and interest portion (i.e. compounded) during the moratorium period.
  • Islamic financing: The profit will continue to accrue on the outstanding principal amount, but will not be compounded in line with Shariah principles. 

So, take note that the interest/profit will continue to accrue on loan/financing repayments that are deferred - which means accumulated repayment amount during the deferment of the repayment period will be added to the outstanding loan/financing amount.


Additionally, BNM suggested you guys discuss the suitable workout plans to repay the principal and interest accumulated during the said time because there’ll be an increase in monthly payments or longer tenure - probably extended by six months.


 

3. It doesn’t apply to credit card balance, but... 

… your card issuer will automatically convert it into a term loan of not more than 3 years at an effective interest of not more than/financing 13% per annum. However, this is only for those cardholders who are unable to meet the minimum monthly repayment consecutively for the last 3 months, regardless of the income levels of the cardholders.



Do know that you can continue to use the credit card up to the remaining credit limit after taking into account the balance converted into a term loan/financing. The outstanding balance converted into the term loan/financing is treated as part of the credit card limit. 

To add, the monthly term loan/financing instalments will then form part of the minimum monthly repayment amount on the credit card. 

 

4.  Your CCRIS records will not be affected.

No, it will not because BNM yang initiated this temporary deferment, not because you don’t want to pay. But, maybe after the deferment period, it can get affected. How come? Because the interest/profit will continue to accrue on loan/financing repayments that are deferred - remember?  



So, as a borrower, you’ll need to honour the deferred repayments in the future. If not, rosak lah your CCRIS. You better call your bank to discuss the options available to resume repayments after the deferment period without affecting your everyday finance.

If you want to know more about credit score, read 11 Things You Might Be Doing That May Hurt Your Credit Score.


SIDE NOTE: Infomation shared is based on BNM's FAQ. If you have any questions about this initiative, please contact your bank first or refer below banks' FAQs: If that still doesn't answer your question, please visit BNM's website at www.bnm.gov.my or contact TELELINK by calling 1-300-88-5465. 
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