What is the EMI Moratorium?
RBI has offered a moratorium on all the loans such as Home loan, vehicle loan, credit card outstanding and all other loan repayments. Under this, you as a loan customer of bank can opt for not paying your EMI for a period of 3 months between 1st April 2020 and 30th June 2020. This is mainly to help people who may have job loss or loss of income due to the COVID-19 related lockdown.
Is it beneficial for me to opt for the moratorium?
If you have a job loss or your income is affected, then you can consider opting in for the moratorium. One point is to be understood that the interest will accumulate and get added to the outstanding principal amount. So, in effect, there is no free lunch. You are only delaying the loan repayment. By opting in, your EMI will increase if loan tenure is fixed or the loan tenure will increase if EMI is kept constant. Let us understand how this works with an example.
Example of home loan opted for 3 month moratorium
Can I opt for moratorium for credit card outstanding?
Yes, you can opt for a moratorium on credit card outstanding. However, you need to understand the rate of interest used for credit card is over 36% per annum. So a 3 month moratorium will add the interest to the outstanding amount at such a high rate of interest will inflate the outstanding amount significantly. So opt for it only if there is no other way out.
You should try not to opt for the moratorium. This is a facility offered by RBI and banks for people who have real stress. If you are in a comfortable position with a good emergency fund, there is no reason to opt for it.