What If You Repay Instalments On Month 7?
Loan Moratorium Financial Impact : Repay Instalments On Month 7
Here is the financial impact of paying the deferred instalments on Month 7, step by step.
We will use the same scenario as the rest – a NEW RM 500,000 loan with an interest rate of 4.25% per annum, and a 30-year tenure.
Step 1 : Calculate The Instalment Deferred
First, you need to know how much money the 6-month loan moratorium is going to put in your pocket :
Okay, now we know that the loan moratorium will let you keep RM 2,459.70 of your money every month, giving you just over RM 14,750 to use during this COVID-19 crisis.
Step 2 : Calculate The Compounding Interest
During the 6-month loan moratorium, you will NOT be paying the bank a single cent. So the banks will generally charge you compounding interest – interest will be charged on the interest accrued to date.
The bank will charge you about RM 10,720 in accrued, compounded interest at the end of six months.
At the end of the 6-month loan moratorium, the bank will add this EXTRA interest and restructure your loan, and you resume paying your new monthly instalments.
Step 3 : Calculate The CHANGE For The Full Term
To calculate how much it will cost you at the end of your 30-year loan, you need to use one of the many loan amortisation Excel templates or online calculators.
Just fill in the details, with and without the extra interest, and you will get the total interest at the end of the 30-year loan.
For your convenience, here is the table we came up with :
|No Moratorium||With Moratorium|
|Loan Principal||RM 500,000||RM 500,000|
|Loan Period||360 Months||360 Months|
|Extra Interest||–||+ RM 10,719.06|
|Extra Payment||–||– RM 14,758.20|
|New Loan Principal||RM 500,000||RM 495,960.86|
|New Monthly Instalment||RM 2,459.70||RM 2,439.83|
|Total Interest||RM 385,491.80||RM 382,377.69|
|TOTAL||RM 885,491.80||RM 878,338.55|
|DIFFERENCE||Baseline||– RM 7,153.25|
If you opt-out of the loan moratorium, you will end up paying RM 885,491.80 by the end of the loan.
If you take the loan moratorium, you will pay RM 878,338.55 – a reduction of RM 7,153.25.
If we consider the RM 14,758.20 (the deferred 6-months instalment) as seed money, you basically get an annualised return of 1.32% per annum.
Next Page > What If You Spread Instalments Over Loan Tenure?
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