We are living in unprecedented times. Coronavirus pandemic has affected everyone on the planet! The world is in lockdown. Lots of people have lost their jobs. Hospitality, aviation are some of the worst affected industries. Unprecedented times call for extraordinary measures. The Reserve Bank of India (RBI) has offered a three-month moratorium on payment of EMIs. The RBI has put the onus on individual banks to offer this facility to its customers. If your bank offers you the choice, should you take it? Should You actually defer EMI payments during lockdown?
It Depends!
Let us the scheme first.
- This is not an EMI or interest waiver. This is a deferment. You will eventually have to pay up after the three-month period.
- Interest will continue to be accrued on the outstanding amount. The only reprieve is that you will have some extra cash during this period.
Assuming you are eligible for availing this facility. Should You actually defer EMI payments during lockdown? It depends on whether your income has been affected by the lockdown or not?
Affected by Lockdown?
Suppose you are affected by lockdown. Either, You have lost your job or seen a significant reduction in your income, go ahead and take the deferment. The important thing is to ensure that you have enough money to meet your living expenses. Nobody can surely say that this lockdown will end after 21 days. Most experts are of the view of extending it.
The most important thing for you is to be secure financially during this uncertain period. The RBI and Government recognizes the gravity of the situation and that is why they offered this scheme in the first place.
I expect a steady paycheck during and after the lock down
If you expect a steady paycheck during and after the lockdown with reasonable certainty, then Should You actually defer EMI payments during lockdown? The answer is: NO. Do not defer the EMIs. As discussed, this is only a deferment. The interest on your loans will still accrue. You will end up paying extra interest and the term of your loan will increase.
Let us understand this through an example. Fisdom shared an example for this scenario.
We can easily see that choosing deferment leads to paying higher interest. So, if you can, pay up!
In conclusion, the safety and financial security of you and your family is the most important agenda. Choose wisely. All the best!
