As per the RBI announcement, this applies to all term loans and all commercial and co-operative banks, as well as all-India financial institutions and NBFCs are, and I quote, “permitted to grant a moratorium of three months on payments of all instalments falling due between March 1, 2020, and May 31, 2020… Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period.” 

There a few things to take away from this announcement, which is why many of us should really consider continuing our EMI payments if we can. 

  1. You’re delaying payments, but you’ll still have to pay. Remember that this is not a waiver. It’s just a deferment. You’re not going to have to pay for three months but you’ll have to pay eventually so you’re just delaying the inevitable. 
  2. It’s gonna cost you. If you avail the moratorium to defer your payments, you’ll be charged interest, which will accrue over that period and be collected once you start making your payments again. The interest isn’t crippling but it’s not a small amount either. More interest is just more money leaving your pocket.
  3. You’ll end up losing benefits. Availing the moratorium means that you lose out on 0% interest or any other cashback offers you are live on. The whole point of paying on EMI is to save money, not spend more, right?
  4. Your loan tenure gets extended. If you avail the moratorium, you end up paying your EMI for an extra three months, along with the extra interest you’re going to be charged. The alternative is to keep making payments, which you’re doing right now anyway, and finish paying off your EMIs as originally planned. This gives you a much better handle on your financial situation, especially when you take into consideration that the impact of COVID-19 is still a bit unpredictable. 
  5. You’re doing your part. It’s natural to focus on your own home first in times of emergency but let’s not forget the impact this lockdown will have on millions of people around the country. Every payment you make, no matter who the recipient, is a much needed influx of cash into the economy and it’s the kind of stability that we all really need right now.

For people who have taken major pay cuts or have lost their jobs entirely or who have suffered severe financial impact due to COVID-19, this moratorium might be a necessity. If you’re not one of those people, though, we highly recommend you to not avail the moratorium. Keep making payments towards your EMIs and save yourself the additional interests you will end up paying otherwise.

It boils down to this: just because it’s an option doesn’t mean it’s the right one for you.