Should you opt for further loan extension after 30 September if you are eligible to apply for the extension?
The automatic moratorium programme which started on 1 April 2020 to assist Malaysians affected by COVID-19 will come to an end on 30 September 2020. Prime Minister Tan Sri Muhyiddin Yassin announced on 29 July 2020 that banks will offer a three-month loan moratorium extension and assistance to targeted groups in view of the current tough economic times. Individuals who have lost their jobs in 2020 and remain jobless are eligible for the targeted moratorium extension of three months.
The question now is, if you are eligible, should you opt for further loan extension? It depends on your current finance situation. If you are capable to repay the loan with your extra saving and have your emergency fund in place, you should not opt for further extension. Loan extension may incur more interest. While you have your extra saving (not your emergency fund) which does not attract high interest in view of the low interest environment, it is better to be used for loan repayment. In addition, allowing yourself not paying the loan payment for longer time might set yourself up for bad habit which will hurt your finances in the long run.
Having said that, if your cash flow is tight, then the loan extension can help to ease your financial burden temporarily. However, while applying for the extension, you shall also consider the following:-
- Reducing your expenses to save more money in the near future to avoid the same issue again after the end of extension period.
- Restructuring your debt. It is a good time to consider perform loan consolidation while the interest rate is low.
- Refinance your existing properties to ease the cash flow problem.
Remember, the applying for the loan extension is only a temporary measure. There will be an end to this, the best thing to do now is to get prepared financially and save up more cash to ease the cash flow issue.
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