Buying a house is no longer a far-fetched dream, thanks to easy home loans. However, the loan repayment experience may not always be easy. Crises like the current pandemic may disrupt your budget. To relieve home loan borrowers from the fears of EMI defaults, the Reserve Bank of India (RBI) has declared a special EMI moratorium period.
Read more to find out all about it.
What is the RBI moratorium period on home loan EMIs?
The RBI moratorium period, also known as the EMI holiday period, is a pre-determined period of time during which borrowers do not need to pay any EMI on their housing loan. The RBI offers such breaks to help individuals facing temporary financial crutches plan their finances better.
However, an important thing to remember here is that once the moratorium period is over, the home loan interest accrued during such period will be added to the principal outstanding, thereby increasing the overall home loan amount. And with such increase comes higher interest outgo.
Benefits offered to home loan borrowers
In general, home loan borrowers can expect the following benefits during the RBI moratorium period –
# No need to worry about repaying your home loan for the specified period – borrowers can experience some breathing space amidst tight liquidity conditions.
# In case of any default, no reports regarding the default position will be made to the Credit Bureaus, and no penal charges will be applicable.
# Borrowers’ CIBIL or Credit score will remain unaffected.
If you’ve been wondering about home loan interest rates during the relief period, they do not change. The moratorium period simply means the freedom to opt-out of paying EMIs for a specified time; no change in interest rates occurs.
Why RBI moratorium benefits on home loan EMIs is not for everyone
No matter the benefits the RBI moratorium period offers, it is still not for everyone. Why? Because of its purpose, which is to provide respite to those dealing with financial difficulties. If you can afford to pay your housing loan EMIs, continue to pay them religiously.
First, the moratorium period is not a waiver of home loan interest, which will only be carried forward to the post-moratorium months, thereby increasing the overall principal loan amount. Second, a home loan is generally a long-term loan, and the moratorium could further increase the tenure, consequently, increasing interest outgo.
When was the last RBI EMI moratorium announcement?
The world is currently grappling with the deadly COVID-19 pandemic crisis, and India is no exception. Strict nationwide lockdowns and minimal civilian movement are still in place. As such, people are either experiencing salary cuts or losing their jobs. Small business owners have taken the hardest hit.
To provide relief to home loan borrowers amidst this crisis, the RBI had announced a 3-month moratorium period from the 1st March 2020 to 31st May 2020. The same has been extended further until 31st August 2020 – a total of six months of deferment.
Above all, the current pandemic crisis has brought the importance of homeownership to light. However, it’s never too late! You can take a home loan online even now. New applicants will only need to pay the interest applicable on the moratorium period.
However, before applying, use a home loan calculator for EMI. Simply enter the values of the principal loan amount, interest rate, and tenure, and the home loan EMI calculator will display the correct EMI amount automatically within seconds. Also, compare lenders to choose the one offering the most competitive home loan interest rates in India.
