Does Loan EMI Moratorium Benefit Customers?
On March 27, the Reserve Bank of India (RBI) had instructed all financial institutions, including banks and housing finance companies, to provide a three-month concession on payment of installments on term loans to their debtors.
With this declaration, people stuck at home during the lockdown are hopeful of some relief. But will customers really benefit from the moratorium? Or will this three-month concession put pressure on your pockets later on?
You can understand the mathematics of your equated monthly installments (EMIs) below. First and foremost, you should know that the moratorium declared by the RBI means only delay, it does not mean ‘waive off’ at all. But even this delay is not so easy. Suppose you have to pay EMIs on your home loan for four more years at present. If you take advantage of the moratorium, it’s not that later on, you will have to pay installments for just four years and three months. Actually, if you take advantage of the three-month concession and suppose, you do not pay EMIs for April, May and June, you will have to shell out more money from your pocket. This is because on taking advantage of the moratorium, the EMIs for these three months will be added to your total loan and you will have to pay EMIs on an increased total amount in future. Let’s now understand it with figures. Suppose, someone has to pay a monthly installment of Rs 50,000 for a home loan and by availing the moratorium she did not pay Rs 1.5 lakh installment to the bank. In such a situation, this Rs 1.5 lakh will be added to her total loan amount and she will then have to pay off the loan on the increased total amount. Let’s understand this even better. Suppose, you are yet to pay 36 EMIs of Rs 50,000 each. If the three EMIs of the moratorium are added to this, then you will have to pay 40 EMIs and not 39. If 60 EMIs of Rs 50,000 were left and three EMIs of the moratorium are added to it, then you will have to pay 65 EMIs and not 63. If 120 EMIs of Rs 50,000 were remaining and three EMIs of the moratorium were added to it, then you will have to pay 128 EMIs. The more the loan duration, the more the EMIs to be paid. However, while evaluating this concession, you will have to bear in mind that the Rupee will depreciate after five or 10 years. Therefore, you should take advantage of this concession after careful thought so that you don’t have any trouble while paying EMIs later on.
You can understand the mathematics of your equated monthly installments (EMIs) below. First and foremost, you should know that the moratorium declared by the RBI means only delay, it does not mean ‘waive off’ at all. But even this delay is not so easy. Suppose you have to pay EMIs on your home loan for four more years at present. If you take advantage of the moratorium, it’s not that later on, you will have to pay installments for just four years and three months. Actually, if you take advantage of the three-month concession and suppose, you do not pay EMIs for April, May and June, you will have to shell out more money from your pocket. This is because on taking advantage of the moratorium, the EMIs for these three months will be added to your total loan and you will have to pay EMIs on an increased total amount in future. Let’s now understand it with figures. Suppose, someone has to pay a monthly installment of Rs 50,000 for a home loan and by availing the moratorium she did not pay Rs 1.5 lakh installment to the bank. In such a situation, this Rs 1.5 lakh will be added to her total loan amount and she will then have to pay off the loan on the increased total amount. Let’s understand this even better. Suppose, you are yet to pay 36 EMIs of Rs 50,000 each. If the three EMIs of the moratorium are added to this, then you will have to pay 40 EMIs and not 39. If 60 EMIs of Rs 50,000 were left and three EMIs of the moratorium are added to it, then you will have to pay 65 EMIs and not 63. If 120 EMIs of Rs 50,000 were remaining and three EMIs of the moratorium were added to it, then you will have to pay 128 EMIs. The more the loan duration, the more the EMIs to be paid. However, while evaluating this concession, you will have to bear in mind that the Rupee will depreciate after five or 10 years. Therefore, you should take advantage of this concession after careful thought so that you don’t have any trouble while paying EMIs later on.
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