Restructuring Your Personal Loans After Moratorium
At some point in time, individuals may need immediate money for an unexpected event, or they need some money to pay for something. It can be unexpected expenses such as hospitalisation, emergency house repairs, or other planned costs like marriage, education, home improvement, and repair or purchase of a vehicle or other reasons.
Personal Loans for Individuals
Banks and other financial institutions pay out these personal loans, subject to proper documentation and collateral to be provided by the borrower. Collateral can be in the form of fixed assets, gold jewellery, shares, fixed deposits, and other instruments that can be easily liquidated. Personal Loan App can calculate details about the loans.
Loan Repayment
The loan is to be paid back in instalments at a rate decided by the lending financial institution. The instalment amount mainly depends on the repayment period, interest rate, and the loan amount itself. Some banks also add insurance costs into the loan. If something happens to the borrower, the bank will be reimbursed for the remaining amount of the loan. These regular instalments are known as EMIs (Equated Monthly instalments).
RBI Notification for Moratorium
On August 6, RBI made an announcement that would help borrowers during the pandemic and lockdown. Many people lost their jobs, salaries were cut, and people were asked not to report for duty. Some of the lucky ones were given the option to work from home. It is under these circumstances that the RBI moved to take steps by advising banks and other financial institutions to offer a three-month moratorium on all personal and corporate loans. This would mean that only the interest would be payable, and the instalment amounts would be deferred until the end of the moratorium period.
With this new situation, the banks and other financial institutions would be compelled to rework or restructure the loan. You can also negotiate with your lender for better terms and conditions.
The good news for the borrower is that the lenders cannot penalise borrowers for non- payment of EMIs. This was categorical in the Supreme Court Bench headed by Ashok Bhusan. The court further ruled that paying interest on interest is a “double whammy” and was not ethical. Borrowers who are financially stressed can talk to their lenders to get realistic terms and conditions.
It is best to opt for restructuring if you have a large liability, and you need a breather to rework your personal finances. Borrowers with small loan balances may not necessarily opt for this.
Personal Loans in India Opting for Moratorium be considered as Bad Loan
All personal loans in India will be considered a standard loan, even if you have opted for loan restructuring. Banks will not consider an NPA and need not make any provision for the same.
Conclusion
Although the moratorium is applicable to all personal loans, it is not necessary to opt for it. Only individuals who are financially stressed and are affected by the weak economy and the pandemic should consider this option. This period can give you some respite and reorganise your finances. It should be the last resort after you calculate the additional interest that has to be paid. This can be calculated by a Personal Loan App. Also, your loan profile will not be blacklisted. The loan will not be subject to penalties, and more importantly, your credit score will remain intact.
