RBI’s 3 months Term loan EMI repayment pause: Experts’ outlook
Three month pause in EMI repayment for term loan borrower
RBI Governor announces three month pause in EMI repayment for term loan borrower. The EMI Pause is between March 1st 2020 and May 31st 2020. As per RBI data as on Jan 2020 there is 13 lakh crore of Housin RBI data g Loan and 2 lakh crore of auto loan pending.
Let us hear out experts’ opinion about the latest RBI announcement.
Home loan EMIs or Auto Loan EMIs
Due to RBI’s 3 month moratorium few borrowers may not pay home loan EMIs or Auto loan EMIs for next 3 months. Under such scenario, few experts reason out that they will have to pay higher interest rate at the end of 3 months.
Financial loan analysts
Financial loan analysts say that simple interest get levied on the outstanding loan. The loan gets treated as repayment due but not paid. They are of the opinion that this is an extra loan cost which you can avoid with on time EMI repayments. The extra simple interest gets added to 3rd month EMI increasing the monthly bill. The extra simple interest may be a burden on all future EMIs too. Else your loan term can get increased in case of same EMI repayments.
An anonymous finance analyst feels borrowers must pay simple interest in one shot. They end up paying more EMIs. Clarification from the banks on the same is being awaited by experts.
Floating rate loans with loan tenure extension facility
RBI moratorium results in extension of loan tenure by 3 more months. This is workable for floating rate loans with loan tenure extension facility.
The addition interest may reflect on all future EMIs of the borrower. This is an extra burden on borrowers’ budget. But banks may keep EMI amount same but increase number of EMIs. This also affects borrowers’ loan cost.
Cash flow troubles due to COVID-19
MoneyTap’s CBO and Co-Founder Mr. Kunal Varma responded to this RBI announcement as below. He says 3 month EMI moratorium could be welcome for borrowers with cash flow troubles due to COVID-19. The borrowers can delay payment for 3 months. But in the end they are liable to pay off the EMIs with simple interest come June. It is important to note it is not loan waiver but shift in payment schedules.
Postponing EMI repayments
He told salaried income borrowers with steady incomes need to assess their finance. They need to consider revised EMIs and interests too before postponing EMI repayments
Reserve Bank Governor announces repayment schedule shift by 3 months after moratorium. It’s big relief to borrowers of home loans. Auto loans, education loans, agricultural term loans, retail and crop loans borrowers too. It applies to Debtors with credit card dues too.
RBI’s circular says that “In respect of all term loans (including agricultural term loans, retail and crop loans), all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies) has permission to avail a moratorium of three months on payment of all installments falling due between March 1, 2020 and May 31, 2020,”
Interest shall continue to accrue on the outstanding portion
The circular quotes that “The repayment schedule for such loans as also the residual tenor, will be move across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period,”
This RBI move is relaxes loan repayment to retail borrowers, MSMEs and companies.
CIBIL Score – Cibil Top credit information company in India
Transunion CIBIL Limited is the top credit information company in India. The company has got credit info access of 600+ million people. Moreover, They have 2400 members aboard. Of whom top lenders are inclusive. Find Top Bank Loan Consultants for Low Cibil Score.
Most trusted credit rating companies
In India, CIBIL is one of the most trusted credit rating companies. They offer credit score or rating to persons or business organizations. Meanwhile, This score or rating is also known as CIBIL Score. Often credit score and CIBIL score is being used as synonyms.
CIBIL has access to all your financial transactions of borrowings ,repayments & credit history. On the other hand, They assess your financial history and give ratings as CIBIL score.
What is CIBIL score?
CIBIL score is the one of the most vital credit evaluation factor. By all means, It is like yardstick measurement of your creditworthiness. By the way, It is based on your earlier financial activities.
Credit rating given by Transunion CIBIL Ltd.
CIBIL score is the Credit score or credit rating given by Transunion CIBIL Ltd. Most of all, This score gets determined by CIBIL based on your credit history & CIBIL report. CIBIL maintains your credit record containing financial info.
Popular credit info companies
There are other popular credit info companies like Equifax, Experian and High Mark. They have their own credit scoring systems. But CIBIL is the leader in the credit info world. Majority of Banks consider CIBIL score of a Bank Loan applicant.
CIBIL score before Loan Approval.
Every finance company or lender examines CIBIL score before loan approval. For instance, a doctor determines your vitals before a medical process. In the same way a lender examines your credit score before loan processing. Choose the best bank Loan Consultants for Low Cibil Score
Credit worthiness of Loan Applicants
The credit info company, Transunion CIBIL has link with most of the top banks. Of course, This makes it easy for them to assess credit worthiness of millions of loan applicants. CIBIL score is a 3 digit number. Above all, It range between 300 & 900.
Good financial discipline and integrity
High CIBIL score implies that proposed applicant has good financial discipline and integrity. Whenever you apply for loan or credit card your latest score for last 6 months gets checked. In general score above 700 is a good score. Yet some banks may have higher standards and some banks do not mind these scores at all.
What is Credit Score? Why maintaining a good credit score is important?
Credit score defines the creditworthiness of a person or business. Let’s compare credit score to average exam score. If your average mark is 60, then it means you are consistent persons scoring 60. This makes you a good student. When your credit score is high, your past borrowings & repayments were responsible.
Reliability or risky nature of loan applicant
Credit score showcases the reliability or risky nature of loan applicant. Thus credit score has great impact on loan eligibility,. loan amount approval & interest rate. The lenders will be able to assess potential risk in lending you the money. Credit score has great influence when you borrow no collateral or unsecured loans.
Good business credit score
Like an individual, business credit score also impacts business image and credibility. A good business credit score will help them secure huge investments. Advantages of CIBIL score are as follows
Full loan amount approval
Low interest rate-Better loan terms.
Lower loan cost.
Quick processing.
Pleasant Loan Experience.
Good repayment terms.
Power of bargaining
Portrays great image
Full loan amount approval-
A good CIBIL score clears all your loan processing hurdles. Many lenders will be competing with each other to lend you. Hence you can be sure of getting full amount of money you applied for loan.
Low interest rate-
There will be competition among lenders to offer you loan as you have good CIBIL score. Many credit offers will have low of interest rate
Better loan terms. –
Many banks or NBFCs are ready to offer better loan terms for good CIBIL score applicants. They may waive off loan processing fees or legal fees or approval charges too. Some banks may not need collateral or guarantor for good applicants. Hence you can get better loan terms
Lower loan cost. –
You enjoy benefit of getting loans at lower cost with better loan terms. It may be like no loan processing fees or legal fees or approval charges.
Quick processing. –
Banks and finance companies give priority to applicants with good CIBIL score. It involves simple documentation and hassle free loan process.
Pleasant Loan Experience. –
Impressive credit image and great CIBIL score goes a long way in a finance world. All loan hurdles gets vanished making you getting finance a pleasant Loan experience
Good repayment terms. –
Your banker can agree to your convenient loan repayment tenure when you have good CIBIL Score. Make use of this great opportunity with maintaining good CIBIL score.
Power of bargaining.-
CIBIL score gives the borrower the power of bargaining. There are many lenders in the market to offer loans to applicants with good credit score. Hence you have the bargaining power chip on your shoulder with good CIBIL score.
Portrays great image.-
Honesty and responsibility are positive qualities. Financial responsibility and integrity are great traits valued in business world. A good credit score helps you to impress your lenders with great positive image
What we should do when we get a loan
Getting your loan approved and having money in your account is not the end of the story. In fact it is the beginning of your credit record. In case if you are first time borrower, credit information companies opens new record. Past borrowers’ are also on track of , credit evaluation companies. Hence you will be under the radar of the credit info companies. They keep track of repayments, foreclosures and delayed payments/defaults. This will have great impact CIBIL or credit score. Credit history has big effects on possibilities of getting new loans in future.
Repay EMIs on time and be regular
As a borrower it is your financial responsibility to repay your EMIs on time every month as agreed. This helps you to have financial discipline in repayment of dues. Be it a short term credit or small loan dues make payment on time and in full. Loan repayment delays & defaults may hamper your credit profile and future loan opportunities.
During emergencies, give priority to loan repayments. They attract penalties and extra interest. To avoid missing due dates, you can give ECS to bankers.
Be a responsible borrower
Loans do not come cheap and free. You have the responsibility to repay your loan with interest. You may be eligible for loan. But that does not mean you to borrow for your luxuries or investment splurges. Borrow when you have need. Use the funds in a wise way. Overcome your financial needs.
Get Loan insurance
Insurance on loan is a smart move for both the borrower and lenders. In particular when the loan amount is huge and is of long tenure. Loan insurance covers the risk of un-affordable debt to your family. The repayment burden may come upon them on dire circumstances. Term insurance for loan not only covers a single loan but a group of loan too covering a fixed period. There will not be any problem when you switch lender.
Keep-up your market research
It is always a good habit to keep track of financial market when you are borrower. Banks and NBFCs often float attractive loan offers. These may be profitable than your ongoing loan. Under such cases you can replace your current lender with the profitable loan option. You may also need to consider the prepayment charges, penalties and other fees too.
Comprehend the loan contract
Loan contracts are full of legal clauses and phrases. They may be difficult to understand and comprehend for a common man. It is important you deduce all the points. It is wise to seek help of Advocates or Chartered accountants to go over your Loan contract.
Debt consolidation
When you have many loans running with high costs, debt consolidation is good. This move will help you ease monthly EMIs or interest rates or tenure. When you provide collateral or make bulk repayments your loan cost comes down.
Keep your retirement corpus safe
Parents do not want to burden their children with loans. A dip in your retirement fund for your child education may not be a good idea. You have education and student loan for those finance needs. Hence plan your finance options and keep your retired life at peace.
Update your family and spouse about loan
It is important to keep your spouse and family about your borrowings. As it has great impact over your household finance. You need to have their co-operation too as it may impact the family budget. It reduces your emotional burden when your family supports you.
Find Top Bank Loan Consultants for Low Cibil Score
