- Will your CIBIL Score get affected due to this recent RBI announcement regarding the moratorium period of all term loans?
- How can you utilize this moratorium period in boosting your credit score?
To support the middle class and small businesses facing the financial stress caused by the Coronavirus pandemic, the Reserve Bank of India (RBI) announced that all banks, Non-banking Financial Companies (NBFCs) will have to allow a moratorium period of 3 months across all term loan repayments outstanding as on March 1, 2020.
A moratorium is a period during which an individual doesn’t have to pay his or her loan repayments. So, during this period, borrowers will not have to worry about their loan repayments and liquidity crisis they will have to face.
This huge announcement by RBI means that borrowers who have taken any type of retail loans such as personal loans, home loans, auto loans, or others can postpone their repayment to three months from now. Lenders will not deduct any EMI amount from their bank accounts for this period. The EMI amount will have both the principal and interest amounts. The entire tenure of the loan can be shifted by another three months.
After this announcement, many people have this doubt whether this announcement regarding the 3-months moratorium period will affect their credit score.
We want to tell you that there will be no effect on your credit score during this period of 3 months. This rescheduling of loan repayments will not be treated as default when banks and non-banking finance companies report it to the credit bureaus. There will be no downgrading in the credit score of individuals or companies who have any kind of retail loans in their names.
Borrowers’ credit history will also be untouched from this announcement during this period of three months. However, if you have any kind of credit card dues, and you fail to pay the EMIs on time, your credit score will be affected as this moratorium doesn’t apply to your credit card repayments.
How Can You Utilize Your Savings to Pay Your Credit Card Dues?
Credit card payments do not come under retail loans, hence shoppers will not get a moratorium period of three months for paying their credit card dues.
You can use the saved money to pay your long-held credit card debt which you were initially planning to pay your retail loans. This could be a golden chance for you. In a way, you can boost your credit score by clearing all your credit card dues on time. You can come out of a debt trap if you had a habit of paying only the minimum due amount. With the extra money in your hand, you could clear off your dues easily as you don’t have to pay the EMIs of any retail loan if you have any.
So, you must have got the gist of it that there will be no impact on your CIBIL score if you stop your repayments of several loans such as home loans, auto loans, personal loans, etc for this period only. Things will be the same after this. And in case, your score is poor and you want to increase it, you have an amazing opportunity to do so by utilizing this saved EMI in paying your credit card dues.