Everyone is struggling economically due to the pandemic caused by COVID-19. Several people faced severe income cuts, job losses, business losses during the lockdown. Due to the reduction in the monthly income, people faced problems in paying their EMIs of different types of loans (personal loan, home loan, etc.) and credit card bills. Seeing this, the Reserve Bank of India (RBI) allowed a 6-month Moratorium period for customers which ended on August 31, 2020. Since this Moratorium cannot go on forever, RBI has announced the Resolution Plan for borrowers who have been financially impacted by the novel coronavirus.
When RBI announced its plan initially, customers thought that the resolution plan will only be available to personal loan borrowers and not for other loans. But later it got cleared out that personal loan refers to loans given to an individual for personal purposes and it will include Home Loan, Auto Loans, Education Loan, etc. Since the RBI has announced the Resolution Plan, leading banks of India such as State Bank of India (SBI), Axis Bank, ICICI Bank and HDFC Bank have followed the wagon and announced Loan Restructuring Scheme to their respective borrowers.
Personal Loan Restructuring Benefits that Customers will get
With the Loan Restructuring Scheme from different banks, borrowers can extend their overall tenure upto a maximum of 24 months. Let’s understand this through an example. Suppose you have opted for a 5-year personal loan and after paying the EMIs for two years, you want to restructure your loan, you can extend your tenure up to a maximum of 24 months according to your convenience. This will reduce your overall EMI amount but accumulated EMI payments over the loan tenure will be more. Also, during the tenure, the interest amount will keep getting charged on your outstanding balance amount.
After the extension of your loan tenure, the EMI amount will be changed and it will be informed by your respective bank. However, if you haven’t been affected by COVID-19, you should keep paying your loan EMIs to reduce the interest amount.
Personal Loan Restructuring Eligibility
The first and foremost thing you should know that not everyone is eligible for the loan restructuring scheme. The bank will check if a borrower has got any impact due to pandemic and then will make a suitable decision. There are some things that a lender will check. One of the conditions that a borrower will need to fulfill is that his or her loan should not be ‘Default’ of not more than 30 days as on March 1, 2020. This means if your loan is overdue for more than 30 days, you are not eligible for a personal loan restructuring scheme.
Other than this, each lender has a different criteria when it comes to minimum outstanding loan amount or credit card balance. For example, Axis Bank allows for restructuring upto a minimum of INR 50,000. For some other bank, it will be different. So, before applying for this scheme, check your lender’s official website for more information.
Change in Personal Loan Interest Rate after Loan Restructuring
A quite common question asked by the individuals is – Will there be a change in the interest rates after the Loan Restructuring? Well, the answer to this question usually varies from one bank to another. For example, borrowers of SBI will need to pay an additional interest rate of 0.35% per annum over and above the current pricing. On the other hand, there is no extra interest rate that borrowers of Axis Bank will need to pay.