Life will hardly remain the same after this COVID-19 crisis. The coronavirus is extending its arm to eat the economy of our country. Stringent lockdowns have hampered the sources of income for all the sectors of the economy and among them, sectors like aviation and hospitality are in severe pain. Economists and scientists are already welcoming the new changes in our lifestyle. They are also predicting lasting changes in our financial status. As per the experts, if the situation continues to be the same or worsen, this will leave us struggling, but small efforts are afoot to salvage whatever they can.
The Reserve Bank of India has announced a three-month moratorium on term loans and credit card dues as a relief measure due to coronavirus. But before availing it one needs to be informed about it and then grab all those beneficial perks.
What is a moratorium?
A moratorium is a time period during the loan term when the borrower is not required to make any repayment. It is a waiting period before which repayment by way of EMIs begins. Normally, the repayment begins after the loan is disbursed and the payments have to be made each month.
Should you take the moratorium?
If you will opt for the moratorium, the interest on their loan will continue to get accumulated due to coronavirus. This will increase the EMIs or additional installments at the end of their loan, or both. So, people with proper cash flow should opt for the moratorium. people who have significant cash flow constraints currently, should opt for a moratorium.
The interest burden is different for different loans and credit cards. So, do not opt for a moratorium if you can arrange the EMI amount.
How to manage your personal finance?
Managing your personal finances is extremely critical in these uncertain situations. In the case of the dearth of funds, one must need to prioritize their payments.
One can do it in any one of the following ways:-
- Credit card dues carry interest rates that are generally 2.5-3 times of those on terms loans. Credit card dues should be the first and top priority to be cleared.
- Personal and other unsecured loans are 6-7% more expensive compared to secured loans. These must be on second priority to be paid. Opting for the three months EMI moratorium, on an average will add 1-2 extra EMIs, in an unsecured loan of 36-48 months tenure.
- For secured term loans like home and property, not paying EMI for three months, may add up to 24 months to the overall loan tenure depending upon the current loan tenure left. Unpaid EMIs would lead to a huge interest burden over the life of the loan. The flexibility, however, is that you could always pay lumpsum amount anytime, unlike unsecured personal loans.