The RBI EMI moratorium program ended on August 31, 2020. Borrowers were allowed to defer EMI payments from March to August 2020 without any impact on their credit score. However, in the future, if you qualify for a loan restructuring and end up restructuring your loan, you need to be careful. In accordance with the RBI guidelines for the EMI moratorium, there is no impact on the credit score if one opts for the moratorium.
“There will be no impact on your credit score if you haven’t paid an IME during the COVID period. This is in line with the recent announcement that RBI has granted a moratorium period and clients who were in good standing until March 2020 may also benefit from a restructuring of their loans. However, if a client restructures their loan under this program and subsequently defaults on the new loan, it will have a significant impact on their credit rating, ”said Aarti Khanna, Founder and CEO of AskCred. Any default on a loan for which you had taken advantage of a moratorium until August 31 will have an impact on your credit score. This, however, is subject to decision on the matter as the case is heard by the Supreme Court on the EMI moratorium.
Reduce EMI load
If one still has issues with servicing EMIs, there are ways to reduce the debt burden. “We can look for ways to reduce the EMI by using the balance transfer and switching to lower interest rates. Evaluate options like home savings programs for flexibility. Negotiate with your banks and ask for an increase in the duration by reducing your IME ”, informs Aarti.
For those with a high amount outstanding on their credit cards, Aarti suggests, “In the case of high interest credit facilities, like a revolving credit card, this can be a very expensive option and can lead the customer into a trap. debt. One should first find ways to pay the credit card dues and not turn on the same. This can be done by taking a personal loan, gold loans, equity loans, etc., as the interest rates would be lower and pay off the full card contributions and also reduce future spending on the card.
Loans are getting hard to get
But, unlike in the past, opting for loans may not be as easy as it seems. Banks and other lenders are tightening underwriting processes than ever before. “In today’s scenarios, using credit facilities from banks and NBFCs can be difficult for many. Banks find it difficult to take out loans in such an environment simply because income is uncertain, largely for the self-employed segment where cash flow cannot be determined due to this pandemic, ”Aarti informs.
“In the given uncertain environment, unsecured loans would be difficult to obtain. In fact, many banks today have restricted unsecured loans to their internal customers against certain substitution programs, or above a higher income threshold that they classify as COVID-resilient sectors such as commerce. electronics, technology, etc. », Adds Aarti.
For those who are struggling to get an unsecured loan, secured loans can come in handy. One can opt for a loan against their existing assets such as gold, bank term deposits etc. And, if you are self-employed and looking to take out a loan, here’s a caveat from Aarti – “Many freelance clients would be tempted to take short-term business loans to jumpstart the business, pay employees. , pay GST, etc. But I would advise people to review their business model and see how it can be diversified. For example, if you run a restaurant, there is a good chance that the company remains impacted a little longer given the pandemic. It would not be wise to take out a working capital loan just to meet current expenses. It would be necessary to assess whether there are other ways to diversify this business model. We need to think seriously.