PETALING JAYA: The Association of Banks Malaysia (ABM) said all banks have been given the same guidelines and parameters for the rollout of the moratorium program to ensure that the program’s approach is consistent across the industry .
However, due to the different back-end systems in the banks and also the different circumstances of the borrowers, there would be slight differences in some aspects, he added.
“We also want to clarify that once a loan is settled, there is no further payment to be made by the borrower.
“The moratorium will allow affected borrowers to channel their reduced financial resources to other more urgent needs such as the purchase of basic necessities and medical services,” ABM said.
AMB said banks were willing to reduce the amount of monthly repayments after the end of the moratorium period, taking into account affordability levels and the circumstances of each borrower.
As a result, generally the terms of the loan would be extended for the total repayments to cover the remaining amount of the outstanding loan.
“Borrowers can discuss with their banks how long they want to extend the tenure based on their needs,” he told StarBiz via email.
The six-month moratorium applies to all credit facilities, including lease-purchase and home finance (except credit cards) that were approved before July 1 and are not not overdue for more than 90 days at the time the moratorium request is submitted to the Bank.
For credit card facilities, banks will offer to convert the outstanding balance into a three-year term loan with reduced interest rates to help borrowers better manage their debt.
Small and medium-sized enterprises can also take advantage of the moratorium on loans, but it is subject to review and supervision by their banks.
Financial experts have said that the six-month loan moratorium under the National People’s Welfare and Economic Recovery Program (Pemulih) is more suitable for those in urgent need of short-term cash flow.
As for those who can afford to repay, financial management experts believe that it may not be a good idea to opt for loan deferral.
In fact, MyFP Services Sdn Bhd Managing Director Robert Foo told StarBiz that borrowers may end up paying more off their longer-term loans because the loan term will be extended.
MyFP is a licensed financial planning company.
“There is a big possibility for the banks to extend the term of your loan by more than six months, even if the moratorium is only six months.
“In general, banks profit more compared to borrowers from the moratorium. But if you are in desperate need of money due to the Covid-19 crisis, the cash from the moratorium will give you temporary financial relief, ”he said.
However, when asked to comment on some neighborhoods’ demand for banks to waive interest during the moratorium period, Foo said it was unfair to the banks.
“Banks still pay interest on the savings of their depositors during the moratorium period. So it is unfair to ask them for a waiver of interest because that is how they make money, ”he added.
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz (pictured below) said on June 29 that the moratorium will not be without interest, but that compound interest and late penalties will be removed.
Compound interest refers to the interest charged on the principal amount and the accrued interest.
Meanwhile, Linnet Lee, CEO of the Financial Planning Association of Malaysia, warned Malaysians against using the extra money from the loan moratorium to invest.
“Last year (during the previous general moratorium) many actually used the loan money to invest in stocks. But this time around, market conditions are very soft and we don’t know how long the restrictions on movement can last.
“If your money invested in stocks does not grow fast enough, you may lose more given the interest that must be paid to banks during the moratorium period,” she said.
Lee, however, stressed that the loan moratorium will suit people who have lost their jobs or suffered significant pay cuts.
“Talk to your banks and look at the repayment mechanism after the moratorium.
“You can request the postponement if you think the reimbursement mechanism is fair,” she said.
After the crisis was over and borrowers’ cash flow returned to normal, Lee recommended borrowers negotiate with their banks to pay higher loan payments each month.
This would help borrowers to complete the repayment of the interest portion of the repayment faster and to some extent reduce the amount paid in interest. “Borrowers need to talk to their banks. But if they are still not satisfied with the repayment plan and if there is a case, they can take the issue to the Financial Services Ombudsman (OFS) for mediation.
“For those who are still struggling despite securing the moratorium on loans, please get help from the Credit Counseling and Debt Management Agency (AKPK),” she added.
OFS is a non-profit organization that helps resolve disputes between financial consumers and financial service providers.
It is approved by Bank Negara.
AKPK is an agency established by Bank Negara and provides debt counseling services, among other things, free of charge.