Loan moratorium: pay nothing now, get hurt later

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YOU SAY | “If you pay more later, it will only increase the debt burden of the rakat.”

A moratorium on loans will cost more borrowers – Bank Negara

Malaysia Baru: A loan moratorium will necessarily increase the cost of borrowing if interest is charged during the moratorium. If interest is accrued during the moratorium period, this amount will be added to the outstanding loan balance at the end of the moratorium.

Depending on the type of loan, the accrued interest, when added to future accrued interest, can have a complex effect throughout the remaining life of the loan, including renewals, resulting in a significant increase in the cost of borrowing.

This is why the moratorium and / or any reduction in monthly payments will come at the cost of extending the loan term and negatively impact the cost of borrowing.

This can be avoided by increasing the loan repayments (to shorten the holding period) when the borrower is in a better financial position.

Banks must help increase payments over the remainder of the loan holding period. Some banks will deny accidental changes in repayment amounts to suck the borrower dry. Be careful.

Brown Commercial banks are greedy and don’t help at all. They can easily sacrifice some of the profits by waiving interest payments for three months and even providing interest-free credit cards for six months, say up to the ringgit 2,000 threshold.

Then the Ministry of Finance can also partially compensate banks for tax benefits.

We have a finance minister from a commercial bank defending property interests, and we have a useless central bank that does nothing but declare the obvious: Essentially, all loans have to be repaid and interest accumulates.

LimeGoat2442: Someone who cares deeply about your best interests will want you to pay off your loans as quickly as possible (just to say, for average Malaysians like us, not counting the complicated patterns of using debt to optimize profits, etc.).

The delay in repayment of the loan and the later repayment only increase the debt burden of the rak’at. Moreover, with their dwindling EPF balances.

Smart and good governments will simply donate cash or subsidize companies to keep their employees, just look at the many examples around the world.

Most of the cash flow of government aid packages lies only between the rakyat and his or her own loans and / or EPF account, which increases the debt burden and reduces retirement savings.

What kind of crazy help is this?

Stand up for the truth: The Perikatan Nasional (PN) government is helping banks under the guise of helping Malaysians who are struggling during this Covid-19 pandemic.

They also make Malaysians poorer by giving up their EPFs to help themselves with their own money, while the government bathes in glory and praises them for helping Malaysians.

The PN government is nothing more than a naked emperor, too self-confident to even realize that he is mistaken.

King Kong: You cannot force banks to stop interest and payments. Imagine if all six or seven large banks did this and their shares sold out on the market.

Cascading losses will hurt investor confidence. The problem reaches the common man.

Manjit Bhatia: @ King Kong, of course. This will crush the economy even more than it does now.

Sooner or later, perhaps later you will face another serious problem. The worst moment is when the economy is on the mend in relative terms.

The US Federal Reserve is already hinting at tightening monetary policy, while the Biden administration is also hinting that it may gradually tighten fiscal policy once the economy reaches a certain sustainable level. This refers to the possibility of raising the official interest rate. That is, banks and other financial institutions will also follow suit.

Imagine this scenario in Malaysia, where the economy is at the bottom of the Strait of Malacca. Or should it be the Klang River? This inevitably means great pain for the economy and its people.

With millions of people out of work (how many unemployed are “sure” is what national statisticians admit, if they are true, they don’t know), jobs must return in unprecedented ways, the economy continues to grow rapidly, foreign direct and portfolio flows to Malaysia (as long as the cost of factors of production remains competitive, and taxes and the global economy are growing strongly again), and there is a spark of re-inflation in the economy (which means business profitability in the first stage). on the other hand, a more expensive standard of living).

One thing’s for sure: you have a regime that can’t run a lucrative cendol store by the side of the road, let alone the entire economy.

The Last Samurai: I have a few questions. How much has our government subsidized or financed this initiative? Would I say zero? I’m right?

We still need to pay extra interest and we are not getting a single gene from the government with this initiative.

2 cents: @Last Samurai, the answer is zilch. No subsidies. This is simply a repayment moratorium that will not cause your account to expire when you stop servicing the loan. You have to pay interest for the delay.

And the bank suffers losses due to the fact that it cannot charge compound interest, other than the fact that it carries a higher cost of funds. Both the borrower and the bank lose.

The only winner is the government saying they helped you with your money.

Dr. Raman Letchumanan: There are two types of installment payment calculation. As with auto loans, the principal amount at which the interest rate is applied remains the same as it was calculated in the fact block of this message. This is a simple interest method, and there is no question of calculating interest.

Another more common loan, such as a home, is a balancing act where interest is calculated on the reduced amount of outstanding principal with a monthly or annual balance, that is, at the end of each month or year. Many do this on a daily basis as it reflects the true value of the funds.

Since no interest calculation is proposed, it is converted to a simple interest method for the period of the moratorium, as the principal remains fixed. Small loss for banks.

Typically, the total payment at the same interest rate is less for the second method compared to the first, because the principal remains the same throughout the period.

Malaysian melting pot: Ordinary citizens are more concerned about whether they and their families might eat during the day or get hungry. It’s about the present, not a month or six months later. Just imagine that you have no money for food.

The last thing they want to worry about is the country’s macroeconomics when they are starving. They don’t care about banks’ stock prices or the consequences. All they want is to survive.

Delaying repayment of the loan will at least take away the problem of not having a roof over their heads while they solve the problem of placing food on the table.

Anonymous 79: Unsurprisingly, banks can still make profits in the past year. PN never helped much. Kita Jaga Kita. Now some of our EPF money is almost over. What else can you expect?


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