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The recent economic slowdown necessitated the RBI to allow banks and NBFCs to offer loan EMI moratorium, from March 1, 2020, to August 31, 2020. After that, the Supreme Court issued an order extending it till October 2020. Many asked for an extension till December 2020, but the Court just directed the institutions to refrain from classifying non-overdue loans (till March 2020) as non-performing assets.
With the moratorium on term loans ending, those of us who availed of it may be worried about ballooning debt. This post will take a look at some actionable steps that will help you stay out of debt, but first, let’s see what effects the moratorium had on your loan EMIs.
You Took the Loan EMI Moratorium: What Now?
A moratorium lets the applicant pay the EMIs from a later date, including principal, EMI rate of interest and other charges. It is not an interest waiver. The interest continues to accrue on the outstanding amount, and EMI rate will apply on the extended EMI tenure.
Therefore, by taking the moratorium on the loan EMI, you will pay a higher amount. It will help you defer payments when you are in a tight spot, till you can rearrange your finances. Your credit score also remains intact, making it easier to gain credit in the future. You can use EMI calculators to see the estimated changes in your monthly EMI.
How to Stay Out of Debt After the Moratorium is Over?
Now that the moratorium is gone, careful debt management is extremely vital. Keeping careful track of all your credit in the form of loans, credit cards etc. and watching your spending is the fundamental step on which everything else rests. Avoid unnecessary expenses.
Don’t Miss Any Loan EMIs
Missing EMIs now will cause loan overdue penalty to add up and make your debt even costlier. It also hurts your credit score, increasing your future EMI rates.
Try to Prepay the Deferred EMIs
Prepayment is the best way to finish off your debt obligations at the earliest. While foreclosing may involve extra charges, especially at the beginning of the tenure, prepayment shaves off months from your loan tenure. The EMI rate stays the same, but the outstanding balance on which the interest accrues diminishes.
Try your best to accumulate enough money to pay off the deferred amount within a couple of months after your loan EMIs begin. To figure out how to best schedule your prepayments, check out our EMI calculators.
Don’t Avail of Any Unnecessary Credit
Avoid racking up any big credit card bills at this time and try not to apply for any more loans till the existing ones are significantly paid off. If you have to buy things, take full advantage of any discount codes and sales.
Conclusion
If you are seriously unable to repay your debt after the moratorium, you should get in touch with your lender. The government has told financers to provide loan restructuring options to distressed borrowers. The lenders will verify your request, and if accepted, you can negotiate new repayment terms of EMI rate and tenure.
