Can you feel the “FEAR” brought about by Covid-19?
With Covid-19 wreaking havoc around the globe, it is just a matter of time before consumers like you and me feel the pinch, not from a health perspective but from the economic standpoint. Businesses are forced to close down temporarily in line with MCO (movement control order) imposed by our government to mitigate the spread of the virus. This is bad for the economy as hundreds, if not thousands of people are forced to take non-paid leave while employers are fretting over the operations of their businesses. Individuals are going to “lose” their jobs and within weeks, families are going to struggle to provide for themselves.
We are not cracking up some scary jokes, but it seems this fear has started to take grip on all of us. Although, the situation is not at all gloomy, as the government has stepped up.
Contingency plan by the government and Bank Negara to arrest the economic slump
The government knew the dire implications and has moved swiftly to combat the wobbling economy situation. Bank Negara Malaysia has announced a number of regulatory and supervisory measures in support of efforts by banking institutions to provide timely financial assistance to individuals, small and medium-sized enterprises (SMEs) and corporations to weather the impact of Covid-19 outbreak. With the impending economic recession slowly taking shape, these initiatives allow financial institutions to remain focused on supporting the economy and provide flexible options for them to cater to the needs of their customers in a swift manner.
Here are the newly launched measures by the government that you should take note of:
Deferment and Restructuring of Loans/Financing Facilities
|Loans/financing to individuals and SMEs||Loans/financing to corporations|
Banking institutions will offer a deferment of all loan/financing repayments for a period of 6 months, with effect from 1 April 2020. This offer is applicable to performing loans, denominated in Malaysian Ringgit, that have not been in arrears for more than 90 days as at 1 April 2020. For credit card facilities, banking institutions will offer to convert the outstanding balances into a 3-year term loan with reduced interest rates to help borrowers better manage their debt.
However, it is significant to take note that the interest/profit will continue to accrue on loan/financing repayments that are deferred and borrowers will need to honour the deferred repayments in the future. Borrowers should therefore ensure that they understand and discuss with their banking institutions on the options available to resume their scheduled repayments after the deferment period.
Individuals and SMEs that do not wish or need to avail of these flexibilities can continue with their current repayment structures.
Banking institutions will also facilitate requests by corporations to defer or restructure their loans/financing repayments in a way that will enable viable corporations to preserve jobs and swiftly resume economic activities when conditions improve. Corporations should approach their banking institutions to discuss their repayment plans and the restructuring of credit facilities.
The Bank has provided appropriate time-bound flexibilities for banking institutions to report deferred/restructured facilities in the Central Credit Reference Information System (CCRIS), taking into account the temporary nature of disruptions faced by borrowers/customers.
Yes we got it, you might have a few questions buzzing around your head as this is such a new initiative that you might not find it altogether easy to digest and understand it.
Don’t be concerned about the “jargons” or technical sentences put together by Bank Negara, Prolution helps to compile all the essential info you need to know to address your doubts and questions.
10 essential info you need to know on Deferment of Loan/Financing Payment (Deferment Package)
1. You will not be imposed with late payment charges under deferment of loan or financing payment.
Such a measure is just a temporary deferment or suspension of loan/financing payment obligation (principal and interest/profit) for a limited period of time. During this period, borrowers/customers with loan/financing that meet the conditions do not need to make any payment, and no late payment charges will be imposed.
Sounds all rosy? However, take note of this carefully. Borrowers will need to honour the deferred payments in the future (it is not free for you after all). Repayment will resume after the deferment period and if such repayments are not fully settled when due, late payment penalties will be imposed. Moreover, interest charged on your loan will continue to be added (accrue) on payments that are deferred and you will need to honour the deferred payments as well in the future. So make sure you are disciplined enough in managing your finance or else such measure might bring you more woes than benefits. Learn to manage your finance with us.
2. Most financial institutions offer deferment packages with slightly different policies.
Fortunately for us, all licensed banks, licensed Islamic banks, licensed investment banks and prescribed development financial institutions (DFIs) regulated by BNM (financial institutions or FIs) will provide this deferment flexibility. If you meet the eligibility criteria, then you are qualified to avail to this flexibility.
3. Both conventional loans and Islamic financing payment obligations qualify for the deferment package.
Either you are individuals or managing small and medium enterprises (SMEs), the deferment (except credit card) are automatically triggered by financial institutions if these criteria are met:
a. Loans that are not in arrears exceeding 90 days as at 1 April 2020;
b. Loans denominated in Malaysian ringgit.
4. Newly approved loans are eligible for this deferment package.
Good news to all the people who have just landed their hand on “fresh” loans out from the oven! The deferment package applies to all loans outstanding as at 1 April 2020!
5. A maximum period of 6 months deferment is all you got.
Although nobody can predict how the situation will turn out in the future, the current deferment outlined is only for 6 months. But if you are hard done even by that period, you could contact your financial institutions if you require a longer deferment period or share your credit issues with Prolution if you need guidance on consolidating your debt.
6. You don’t have to do anything to qualify for this deferment package.
All individual and SME loans (excluding credit cards) that meet the criteria will automatically qualify for the deferment. Your financial institution will provide information through their websites and reach out individually to you through sms,emails or calls with more information on what to expect during the deferment period, along with options on repayment plans after the deferment period. Sweet and simple.
7. Keep calm and ride out the Covid-19 storm with peace of mind as your CCRIS records will not be adversely affected.
Your CCRIS will not be affected during the deferment period as it will remain similar as per the status as at March 2020 throughout the deferment period. Wonder how to find your CCRIS record? Knock us at our door!
8. Be aware that loans with other non-bank credit providers such as credit cooperatives and authorised money lenders do not qualify for this deferment package.
Other non-bank lenders or credit providers that are not regulated by BNM are not participating institutions in this package. So make sure you fully understand which type of financial institution you are dealing with.
9. You may or may not be charged with additional interest.
Well, it is fair for your financial institution to continue interest charges on the outstanding balance comprising both principal and interest portion (i.e. compounded) during the deferment period. Good news is some banking institution may decide not to compound interest during the deferment period. So before deciding whether this measure is working towards your interest, check out with your financial institution. Just bear in mind that you will not be imposed with late penalty charges.
10. You may need to fork out more subsequent instalment amount or have an extended loan tenure after the deferment period.
Don’t overlook the importance of giving sound consideration on the payment options proposed by your financial institution, in particular on how to resume payments after the deferment period. This may include higher subsequent instalment amount while preserving the original tenure, or an extension of the tenure after the 6 month deferment period. Be sure to understand the overall financial implications and your ability to meet these and should reach out to appropriate parties via calls or e-mails if more information is required.
Now that’s a huge load of useful information to keep you abreast of the latest financial support from the government!
What about Conversion of Credit Card Balances into a 3-year Term Loan/Financing (Conversion Package)? We want to make sure every aspect is being taken care of for our readers so we have also listed out the most useful information you might need as below:
7 things you should know on Conversion of Credit Card Balances into a 3-year Term Loan/Financing (Conversion Package)
1. Are you a cardholder? If yes, you are eligible to apply regardless of your income.
No matter how much you earn in your day job, all cardholders are allowed to participate in the conversion package. If you missed three consecutive months of minimum monthly payments, your outstanding credit card balances will automatically be converted into a term loan up to three years in tenure. Besides, you will also have the option to opt-in at any point from 1 April to 31 December 2020 to convert your credit card balances into term loans at the same tenure and rate as above.
2. You are only allowed ONCE for the conversion package.
Inability to meet credit card minimum repayments again after the first automatic conversion will not subject the balance to be automatically converted into a term loan/financing. The automatic conversion into term loan/financing will only be done once during the period from 1 April till end Dec 2020.
3. Early termination is allowed.
If you are able, you could end your term loan earlier than the stipulated tenure. However, you need to fully settle the term loan/financing balance, just that there is no early settlement penalty.
4. Usage of credit card will not be affected.
Rest assured that you can continue to use your credit card up to the remaining credit limit after taking into account the balance converted into a term loan. The outstanding balance converted into the term loan is treated as part of the credit card limit.
5. Your CCRIS records will not leave a bad stamp
As usual, don’t fret about whether your CCRIS record will be adversely affected. It will remain intact as long as your credit card account is performing (in arrears for 90 days or less) at the point of conversion. However if your credit card account is already non-performing (in arrears for more than 90 days), this will continue to be reflected in your CCRIS record. Get in touch with us to know more about your CCRIS records.
6. You are not allowed to choose the term loan period.
The term loan tenure will be decided by your financial institution, however it surely will not exceed 3 years.
7. No minimum amount is required for the conversion to take place.
Although there is no stipulated minimum amount, it should be reasonable as amounts that are too small will be impractical to convert into a term loan that might go along the way up to three years. Seek further information from your engaged financial institution to ensure your eligibility.
So there you go with all the pertinent and useful information concerning the latest economy-saving measures launched by the government. Interested parties should give it a thorough read and analyse your own financial status with a keen eye before deciding on any one of the available options. Do not hesitate to contact Prolution if you are unsure of any information stated or wish to have a disciplined and sound advice on your current financial standings. We help individuals to manage their assets and guide them step-by-step to grow their net-worth and safeguard their capital.
And most importantly, stay home, stay safe.