While we laud the RBI gesture for giving a moratorium of 3 months in paying EMIs (for a retail loans like home loans etc) in lieu of the corona pandemic which seems to be scary looks in eyes of job losses and salary cuts it may be WISE to keep paying your home loan EMIs for the aftereffect of the moratorium period is probably scarier and stressful.
If a 3-month moratorium in paying EMI is availed by the customer from the bank the bank will perhaps give 3 options to choose from: –
1. Onetime payment after a 3-month period ends with the interest accrued. This will result in a fatter EMI than paying monthly.
2. Add the interest to the outstanding loan and increase EMI for the remaining months. Bigger EMI month on month. The complete personal financial planning needs an overhaul
3. Keep the EMI unchanged but extend the loan tenure. The number of additional EMIs will depend on the age of the loan.
Missing 2 instalments could extend your loan by 6-10 months or increase the EMI amount by 1.5 %
If financial leveraging is utilized for fulfilling a need or a desire it is better to keep paying off the debt per schedule else the outstanding amount keeps adding and you enter a vicious debt cycle.