All you need to know about HomeFirst EMI Moratorium Program

Hello there. Before we get into the discussion of the recent EMI moratorium announced by the RBI on March 27th, 2020, I hope that you and your loved ones are doing well and are taking all the precautions to keep yourself safe from Covid-19.

Now let us see how we can plan our finances during this stressful period! To give us all a breather RBI has proposed a relief package. Where the banks and other financial institutions have been permitted to give borrowers a “moratorium” or in other words grace period of three months for payment of EMIs. This is proposed for home loans, auto loans, personal loans etc.

What does this mean for you as a customer? This means that you have an option to miss the EMI payments that you have between 1^st March to 31^st May 2020 (moratorium period). This will help you reduce your burden during this period when lockdowns are in place and business and cash flows are impacted. But (all good things in life are followed by a “but”), RBI has mentioned that the interest for this moratorium period will continue to accrue on the outstanding loans. This means that the interest for the moratorium period has to be paid back later by the customer.

A few more details on the moratorium in case you missed the small print….

1. The decision to opt for a moratorium is yours. You can choose to pay your regular EMIs. This will definitely save you additional interest.
2. The moratorium period has been defined as 1^st March to 31^st May and the announcement was made on 27th March. Most of you responsible borrowers have already paid your March EMIs, so that means, you get an effective moratorium of 2 months, that is April and May!
3. Also, this moratorium is valid only for loans that were existing as on 1st March 2020. So, in case your loan was disbursed after 1^st March 2020, then the moratorium is not applicable to you.

With me so far? Let me make it more clear with an example:
[For purpose of discussion, we will refer to a sample customer transaction:

Loan Amount: Rs. 10 Lakhs

ROI: 13.50%

EMI: Rs. 12,074

Original loan tenure: 240 months

Balance loan tenure: 200 months (starting from April, 2020 and ending in Nov, 2036)

The customer has already cleared his 4^th March EMI]

The above customer will pay an EMI of Rs 12,074 on 4^th April and 4^th May in the normal course. These EMIs consist of interest component of Rs 10,784 and Rs 10,770 and principal component of Rs 1,291 and Rs 1,305 respectively. However, we propose to offer a Moratorium Program to this customer.

1. Under this program, customer will not pay any EMI/Interest in April and May.
2. Customer will resume paying his monthly EMI from 4^th June 2020. This will have respective break up of interest and principal. (Principal repayment will continue from June 2020)
3. Since we have not recovered any principal from the customer in April and May, this will result in pushing out the maturity of the loan by 2 months. Customer’s balance tenure of 200 months will now start from June 2020 and end in Jan 2037.
4. This still leaves us with the interest for Apr and May to be recovered. This amount (Rs 10,784 + Rs 10,770) is equal to Rs 21,554.
5. At Home First, we propose to give customers 2 options to pay this back.
   • Rs 21,554 to be paid back in 6 equal instalments along with interest on this amount at the same rate of interest as the parent loan (Additional amount of Rs 3,798 in addition to regular EMI of Rs 12,074 starting from June 2020). Repayment of additional amount will also start from 4^th June 2020
   • Rs 21,554 to be paid back in 12 equal instalments along with interest on this amount at the same rate of interest as the parent loan (Additional amount of Rs 1,963 in addition to regular EMI of Rs 12,074 starting from June 2020). Repayment of additional amount will also start from 4^th June 2020

By now it should’ve become clear to you that opting for the moratorium is going to increase your loan burden i.e the interest outflow. Therefore, the smarter thing to do here is to pay your EMIs on time as per the schedule if you can afford to. Please opt-in for the moratorium only if you’re facing a huge cash flow issue!

Now, what happens to your credit score if you opt for the moratorium? Here’s the good part, the answer is “nothing”! Opting for a moratorium will not impact your credit score.

If you are a Home First customer and would like to avail a moratorium, please contact your Branch for more details. You can download the moratorium consent form here.

We hope this was worth your time and now you would be able to make a more informed choice! Please stay home and take care!

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