For those, whose earnings have stopped due to lockdown, the respite in paying EMIs for 3 months, is a great relief, as without regular earnings, it would become very difficult to honour the fixed obligation.
To provide relief to borrowers affected by nationwide lockdown to contain the spread of highly contagious Novel Coronavirus COVID-19, the Reserve Bank of India (RBI) has declared a 3-month moratorium on loan repayment.
It would be very helpful for those persons like cab owners, who have bought their vehicles on loan and put the cars on rent to earn a livelihood as well as pay back the loan through equated monthly installments (EMIs), as their earnings have dried up due to stoppage in operation on account of lockdown.
So, for those, whose earnings have stopped due to lockdown, the respite in paying EMIs for 3 months, is a great relief, as without regular earnings, it would become very difficult to honour the fixed obligation.
However, availing the EMI moratorium is an optional one. Hence, your EMI wouldn’t stop automatically, and you have to ask your bank to put a pause on loan repayment during the moratorium period.
But, should all the borrowers avail the EMI moratorium?
As the interest will continue to accumulate even during the moratorium period of 3 months, it will create an additional burden on future installments, so if you can continue to pay your EMI, you should continue to pay.
The amount of interest accumulated during the moratorium period, however won’t be charged at one go, but would be distributed among future EMIs. Moreover, your loan repayment period would also increase by 3 months, unless you make some prepayment after availing the moratorium benefit.
So, don’t ask your bank to pause your loan repayment, just to avail the benefit of the moratorium, but only do so, if you are not in a position to repay it due to loss of earnings during the nationwide lockdown to ensure social distancing to save the country from the highly infectious variant of the Coronavirus.