The COVID-19 may have created money pressures for your and your family. A reduction or loss of salary is bound to do this. You may have had a Rainy Day Fund in hand to see you over a money emergency. You have been trying to keep things normal and you have been dipping into the Rainy Day Fund to achieve this.
The COVID-19 situation has now been with us for nearly 6 weeks or so. You have reached the point that your Rainy Day Fund is now exhausted. Yet you have a home loan to pay.
It is 29th April 2020. The COVID-19 situation has not improved. Come 15th May 2020 you need to pay the monthly loan of €400. You do not have this money. You are going to be in default. You are worried that you may lose your house.
What am I going to do you may be asking yourself. There is an option to apply for a Loan Moratorium Holiday. This means you press pause and take a break from making any repayments, both on the principal (the part you borrowed) and the interest (the part your lender charges you for using that borrowed money).
It is important that you are aware that the Government has mandated banks to provide, among others, families should they so request it with a Loan Moratorium Holiday. During this period you will not pay the home loan – thereby easing cash pressures on you and safeguarding you from facing a situation where you may forfeit your home.
The moratorium is only a suspension – and a temporary one at that – of your repayment obligations. Therefore the payment of terms under which you obtained your home loan – the initial loan sum and the interests to be paid – are not cancelled. Rather they are postponed for payment at a later date.
During the Loan Moratorium Holiday interest accrued will still have to be paid but there will be no interest on the deferred interest to be paid.
There is no doubt that a Loan Moratorium Holiday if you cannot make your repayments right now because your income has been interrupted is a great financial support mechanism. It does not, however, come for free.
All the time you are benefiting from a Loan Moratorium Holiday and hence you have suspended making payments, the interest charges will continue to add up behind the scenes. The end result is that you have to repay more interest overall.
A Loan Moratorium Holiday comes at a price. It is, therefore, important that you do not remain in a Loan Moratorium Holiday for more than you need to do so.
No. To qualify for a Loan Moratorium Holiday you must meet the following criteria:
- You are facing temporary financial hardship
- You are finding it difficult to honour your financial commitments in time
- Prior to 1st March 2020 you always paid your loans on time
- Your loan is sanctioned before 14th April 2020.
The Banks are of course aware of the Loan Moratorim Holiday. The sooner you speak to them the better. They will assist you – and are likely to get back to you pretty soon after you approach them. They will guide you on your application process for a Loan Moratorium Holiday.
It has been set for 6 months. This may be extended.