PETALING JAYA: Association of Banks Malaysia (ABM) said all banks have been given the same guidelines and parameters for the rollout of the moratorium programme to ensure that the programme approach is consistent across the industry.

       However, due to the different back-end systems in the banks and also different borrowers’ circumstances, there would be slight differences in certain aspects, it added.

       “We also wish to clarify that once a loan is settled, there is no further payment to be made by the borrower.

       “The moratorium will enable affected borrowers to channel their reduced financial resources to other more pressing needs such as to purchase daily essentials, and medical services, ” ABM said.

       AMB said banks were willing to reduce the quantum of the monthly installment repayments after the end of the moratorium period, taking into consideration the affordability levels, and circumstances of each borrower.

       MyFP Services Sdn Bhd managing director Robert Foo told StarBiz that borrowers may end up paying back more for their borrowings in the longer term as the loan tenure will be extended. MyFP is a licensed financial planning firm.

       As a result, typically, the loan tenures would be extended for the total repayments to cover the remaining amount of the loan that is still outstanding.

       “Borrowers can discuss with their banks on how long they would like to extend the tenure depending on their needs, ” it told StarBiz via email.

       The six-month moratorium is applicable to all credit facilities including hire purchase and home financing (except for credit cards) that were approved before July 1 and are not in arrears for more than 90 days at the time the request for moratorium 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 enterprises can also take up the loan moratorium, however, this is subject to review and scrutiny by their banks.

       Financial experts said the six-month loan moratorium under the National People’s Well-Being and Economic Recovery Package (Pemulih) is best suited for those who are in dire need for cash flow in the near term.

       As for those who have the means to repay, financial management experts said that it may not be a good idea to opt for the loan deferment.

       In fact, MyFP Services Sdn Bhd managing director Robert Foo told StarBiz that borrowers may end up paying back more for their borrowings in the longer term as the loan tenure will be extended.

       MyFP is a licensed financial planning firm.

       “There is a big possibility for banks to extend your loan tenure by more than six months, even though the moratorium is only for six months.

       “In general, the banks benefit more compared to the borrowers from the moratorium. But if you are desperate for cash due to the Covid-19 crisis, the liquidity from the moratorium will provide you with temporary financial relief, ” he said.

       However, when asked to comment on the demand by some quarters for banks to waive the interest during the moratorium period, Foo said it was unfair to the banks.

       “The banks are still paying interest on the savings by their depositors during the moratorium period. So, it is unfair to ask them for a waiver of interest as that’s how they make money, ” he added.

       Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz (pic below) said on June 29 that the moratorium will not be interest-free but the compound interest and late penalty charges will be waived.

       Compound interest refers to the interest charged on the principal amount and the accumulated interest.

       Meanwhile, Financial Planning Association of Malaysia CEO Linnet Lee cautioned Malaysians against using the extra cash from the loan moratorium to invest.

       “Last year (during the previous blanket moratorium), many actually used the money meant for loan repayment to invest in stocks. But this time around, the market conditions are very soft and we don’t know how long the movement restrictions may last.

       “If your money invested in stocks does not grow fast enough, you may end up losing more considering the interest that needs to be paid to the banks for the moratorium period, ” she said.

       Lee, however, highlighted that the loan moratorium will be suitable for those individuals who have lost their jobs or have taken major paycuts.

       “Talk to your banks and look at the repayment mechanism post moratorium.

       “You can apply for the deferment if you think the repayment mechanism is equitable, ” she said.

       Once the crisis is over and the cash flow of borrowers returns to normal, Lee recommended that borrowers negotiate with their banks to pay higher loan installments every month.

       This would help borrowers complete paying off the interest portion of the repayment faster and to an extent, reduce the amount paid in interest.“Borrowers must discuss with their banks. But if they are still unhappy with the repayment plan and if there is a case, they can bring the issue to the Ombudsman Financial Services (OFS) for mediation.

       “For those who are still struggling despite getting the loan moratorium, please get assistance from the Credit Counselling and Debt Management Agency (AKPK), ” she added.

       The OFS is a non-profit organisation that helps to resolve disputes between financial consumers and financial service providers.

       It is approved by Bank Negara.

       The AKPK is an agency set up by Bank Negara and provides debt counselling services, among others, for free of charge.