Published on May 1st, 2020 | by Subhash Nair0
Bank Negara Changes Moratorium Policy for Hire Purchase Loans
Earlier in March, Bank Negara Malaysia announced an automatic moratorium on all housing and hire purchase loans due to the economic slowdown during MCO. However, the central bank has now issued a new statement regarding moratoriums on hire purchase loans and fixed rate Islamic financing.
The earlier general understanding was that banks would pause the loan repayments and monthly installments for the 6 month period. The message that seemed to be conveyed was that it was as if customers would get an automatic 6-month interest-free payment holiday. Loan payments would resume in October 2020 and you would pay it would simply end 6 months later than originally agreed.
Their latest statement indicates the following changes as Bank Negara Malaysia begins giving the moratorium full legal affect:
- if you’ve already opted in, April and May will remain interest-free payment holidays, but not the remaining 4 months
- it is no longer an automatic opt-in for customers
- banks must make it clear to customers what their new terms are for the moratorium, including a revised payment schedule with any changes to monthly payment amounts
What this might mean for you is your bank may choose to add interest for four additional months to the remaining number of monthly payments you have left, based on your agreed upon per annum interest rate.
There are two options for you to deal with this:
- When October 2020 comes, you pay all 6 months worth of deferred payments in one go, on top of your monthly instalment for October. This will avoid any additional interest being added and it will not extend your repayment tenure.
- When October 2020 comes, pay a revised monthly instalment that will be higher than you initially agreed, and pay it for 6 months longer than you originally agreed to.
How much will it cost you? That depends on how many months you have left in instalments, how much your interest rate is, and how much your monthly instalments are. Best to get your bank to contact you (when they are ready with your file, not call them and expect to you have file ready immediately). Get them to explain how much this moratorium will cost you and then decide if it’s worth it.
If it’s not worth it for you, you may opt out of the 6 month moratorium starting May 2020 without penalty. But please contact your bank and communicate this clearly with them.
Here’s the press release from Bank Negara for your consideration.
Further to Bank Negara Malaysia’s (BNM) announcement on 25 March 2020, banking institutions are in the process of formalising agreements which reflect the revised payment terms with borrowers/customers with hire-purchase (HP) loans and fixed rate Islamic financing to give effect to the 6-month moratorium on loan/financing payments. This is to comply with the procedural requirements under the Hire-Purchase Act 1967 and Shariah requirements which are applicable to any changes that are made to the terms of these agreements, including changes to the payment schedules and/or amounts as a result of the moratorium.
In connection with the above, BNM has required banking institutions to take appropriate steps to ensure that borrowers/customers are provided with clear information on the process and changes to the terms of their agreements, as well as convenient means to conclude these agreements in view of the Movement Control Order.
Starting from 1 May 2020, borrowers/customers with HP loans and fixed rate Islamic financing will receive a notification via SMS, email or registered mail from their banking institutions on the necessary steps that they need to take to complete the process of deferring their loan/financing payments under the moratorium. Banking institutions will also provide to each borrower/customer specific details of changes to the terms of his/her HP loan or fixed rate Islamic financing agreement. This should contain information on the revised payment schedule and any changes to payment amounts, including those arising from normal interest/profit rate accrued during the moratorium.
Borrowers/customers who do not wish to take up the moratorium can still choose to do so at this time by informing their banking institutions and resuming their scheduled payments based on the terms of their existing agreements. In such a case, borrowers/customers will be given reasonable time by banking institutions to regularise any outstanding scheduled payments that were earlier deferred under the moratorium. Banking institutions will not impose overdue or late payment charges on these payments until they are due based on the revised payment schedule agreed with borrowers/customers.
Borrowers/customers are encouraged to refer to the websites, internet banking portals or call centres of their banking institutions for further information.
Bank Negara Malaysia
30 Apr 2020