PETALING JAYA: A veteran financial planner has advised Malaysians to use the six-month automatic moratorium on bank loans and credit card late payment charges to find additional income sources.
Speaking to FMT, Robert Foo, from financial planning company MyFP Services Sdn Bhd, said the measures would be a big boost to those facing cash flow issues, whether they were getting a pay cut or losing their jobs.
He explained how the six-month moratorium, from April 1 to Sept 30, 2020, works.
The loan deferments, whether for personal, vehicle or home loans, are automatic and there is no need for anyone to apply for them.
The deferments will be for six months but banks will still charge interest during the six months, though you only continue payment after Sept 30.
“While the banks will continue to charge interest for six months, they will not hassle you for not paying within this period. Simply put, it means that your loan will be extended by another six months.”
As an example, he said if someone had a monthly home loan repayment of RM1,200 (principal + interest) they will continue paying this for six months longer than scheduled.
“You can still continue to pay during the six months if you want but you have to inform your bank.”
The charging of interest, he said, was fair because banks also had their commitments, including having interest payments on fixed deposits. “If you expect the banks to suspend charging interest, it will not be fair.”
He said the clause that said automatic deferment was not applicable to defaulters who had not repaid their loans for 90 days was also understandable as these borrowers might have to pay other charges for their late payments.
“Bank Negara cannot reverse contracts. This is also why interest will still continue to be charged on loans.”
Credit card users
Foo said for credit card users, there was no moratorium on what was owed and this was understandable as whatever debts accumulated had to be settled.
“You still have to pay your debts but you will not be charged late payment charges or interest during these six months.”
But those who cannot afford to pay their credit card debt can convert their debts into a fixed loan of not more than three years at a maximum 13% interest rate.
This, he said, was already being offered by many banks.
He gave the example of someone buying a television set for RM2,000 using their credit card before the MCO, resulting in a RM2,000 debt on the credit card.
The available options, he said, would be to pay off the debt, pay the minimum amount or convert the debt into a bank loan.
For those wanting to lower their lending cost, he said, converting the debt to a loan was a better option because the maximum 13% interest rate was lower than the average 18% interest charged by credit cards.
“The only downside is that you will now have another scheduled payment obligation. Generally, financial planners do not advise just meeting the minimum payment but to always pay off your credit debts monthly. You are only allowing your debt to grow at 18% by doing that.”
Foo said these six-month loan-related measures would help the people keep their heads above water but warned that it was not a “cure”.
“You still have to pay your debts after six months, so the more important thing to do within these six months is to look for ways to make additional income.
“I would suggest that those with cash flow problems get the help of a licensed financial planner to help map out a financial game plan to navigate through this difficult period.”