Gold Loan Moratorium

Gold has proved to be a haven in financial adversities. People trust gold loans as a funding alternative in times of need. It is an easy and quick way to tackle a financial emergency. It is a secured loan where the pledged gold acts as collateral. It is one of the easiest and most cost-effective loans with no restrictions on end usage. However, if you remain in debt and cannot repay the loan amount, you can request a gold loan moratorium.

What Do You Mean By Moratorium?

A moratorium is a temporary suspension of activity until a future event warrants lifting the rest or until the related issue resolution. Temporary financial hardships and crises that disrupt normal day-to-day operations lead to moratorium schemes.

For example, a government or central bank may grant an emergency moratorium on some economic activities after an earthquake, flood, drought, or disease outbreak. They may lift the moratorium as soon as it returns to normal. Recently, the RBI announced a moratorium during the COVID-19 pandemic as the entire country went into lockdown, disrupting everyday activities.

Education loans often offer this feature even without natural catastrophes. Students who take an education loan can start repaying it one year after getting a job or graduating. After that, the period during which they are unlikely to make payments is the moratorium period.

What Is A Gold Loan Moratorium?

If you have an existing gold loan and are facing difficulty repaying any of the installments, you can apply for a moratorium on the gold loan. However, it depends on your lender, too, whether they have the moratorium scheme in place.

It is noteworthy that a gold loan moratorium is not a waiver. It is just a delay in repayment. It does not allow you the right of liability; it delays your installment to a later date. The moratorium includes both the principal and interest rate components.

What Is A Moratorium Period?

A moratorium is a period during the life of a loan during which the borrower does not need to repay—it is a waiting period for EMI repayment to resume. Repayments usually begin after the lender sanctions the loan. However, due to a moratorium, prices will start after some time.

Education loans offer this facility where the students can repay the loan after they start earning. As a result, there may be a delay between completing studies and starting work.

What Is A Moratorium Example?

The most recent example of a moratorium was the COVID-19 pandemic. On March 23, the Indian government imposed a nationwide lockdown to combat the virus. The move affected businesses with missing jobs and cancellations of flights, trains and buses.

On 27 March 2020, the RBI took stock of the situation and, in response to the temporary financial difficulties, announced that all lending institutions, including banks and mortgage lenders, would extend the loan term to the borrower for three months. The moratorium applies to all installment payments from March 1, 2020, through May 31, 2020. According to RBI, installments deferred under the suspension include the following fees due during the above period:

• Components of capital and/or interest
• Lump-sum repayment
• Equal Monthly Payments (EMI);
• Credit Card Fees

Any commercial, regional, rural, or small finance bank could extend the RBI moratorium. In addition, any Indian lender could offer a suspension across different types of loans.

The RBI lets the banks decide how to offer the moratorium to their customers. Some banks would ask you to submit a request to "opt-in" to the suspension. But there is no assumption that you want to continue the normal repayment cycle. If you have an optional moratorium offer and do not want to change your repayment cycle, you must apply to opt out of the program.

What Are The Salient Features Of RBI COVID-19 Moratorium Scheme?

The salient features of RBI moratorium scheme include the following.

• Eligibility Criteria:

All borrowers with credit facilities classified as MAFIL standard assets as of February 29, 2020, and with impacted income due to COVID-19.

• Eligible Loans:

The various loan facilities include:
a. Gold loans
b. Commercial Vehicle loans, including farm equipment and auto loans
c. Two-wheeler loans
d. Personal loans (including digital loans)
e. Personal loans - Salaried
f. SME / MSME loans
g. School Finance
h. Microloans, including SSIs, Bakery, restaurants, healthcare, travel, Teachers, Micro Home Finance etc.

• Permissible Extent:

Eligible borrowers wishing to opt for the program may apply with a scanned copy of the application duly signed by the borrower and including a guarantor. The maximum allowed amount for deferral is three monthly installments.

• Interest During The Moratorium Period:

If the borrower's income is sufficient to pay the interest during the moratorium period, the borrower must pay the interest accrued. Otherwise, interest accrued during the moratorium will be added to the principal and repaid by future EMI/installments as determined by MAFIL.

• Refixing Of Installments:

You can pay the deferred EMI with accrued interest-

a. by evenly distributing the accumulated interest component among the remaining EMI.
b. Increased interest during the moratorium on the last or last three installments. Also, via an additional EMI/fee at the end of the current contract term.
c. If the remaining term/loan term is longer, the deferred capital and interest must be repaid within 24 months.

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IIFL Finance provides safe, quick, and hassle-free gold loans at affordable rates. The gold loan process at IIFL Finance is swift, with minimal paperwork, instant transfers, competitive gold loan interest rates, and flexible repayment schedules.

Rest assured, your gold assets are secure as we keep them under modern safety lockers and offer insurance coverage to the support. Avail of the benefits and apply for a gold loan with IIFL Finance today!

Frequently Asked Questions

Q.1: Does the loan amount increase during the moratorium period?
Ans: The moratorium period continues to accrue interest. Hence, it is better to pay off the debt if the borrower has the liquidity capacity to reduce the interest cost.

Q.2: Is a moratorium waiver?
Ans: No, the moratorium only defers the installment payment to a later date. It is not a partial waiver.

Q.3: When can the borrower opt for a gold loan moratorium?
Ans: A borrower can opt for a moratorium three days before its loan installment.