Did you take a moratorium for your personal loan from March 1 to August 31, 2020? Or did you pay the loan EMIs as usual? Whatever the case may be, you will get interest cashback on your personal loan repayment. The government has announced an Ex-gratia payment scheme for loans upto INR 2 Crore. It is an interest cashback scheme where the lenders will credit the difference between compound interest and simple interest on outstanding loan balance as on Feb 29, 2020, for six months (March 1 – August 31, 2020) in your account.
But how will the compound and simple interest on the personal loan balance apply? And how much can you save with this latest initiative from the government? All that and much more is explained in this post. Let’s read!
How Will Lenders Go About Offering Interest Cashback to Personal Loan Borrowers?
Lenders will check the outstanding balance and the interest rate as on Feb 29, 2020, before calculating the simple and compound interest for the next 6 months i.e. 1st March to 31st August 2020. The interest gets compounded at different intervals – Monthly, Quarterly, Half-yearly and Annual basis in compound interest. But which interval will lenders use while calculating interest cashback benefits for personal loan borrowers? As far as the guidelines go, lenders will use the monthly interval to calculate the same.
Let’s Check the Calculation
The savings due to interest cashback will depend on the interest rate and outstanding personal loan balance as on Feb 29, 2020. In the current scenario, you can get a maximum personal loan of INR 50 lakh. Whereas, the average loan amount would be around INR 10-20 lakh. We will take the loan amount of INR 3 lakh, INR 7 Lakh, INR 10 Lakh, INR 15 Lakh, INR 25 Lakh and INR 40 Lakh and calculate cashback for each of these at an interest rate of 15% per annum.
|Loan Quantum (In INR)||Compound Interest (In INR)||Simple Interest (In INR)||Interest Cashback (In INR)|
When Can You Get the Credit from Lenders?
Lending institutions will need to credit the cashback into the accounts of borrowers latest by November 5, 2020.
Note – The cashback benefit is subject your personal loan account being standard and not a non-performing asset (NPA) as on Feb 29, 2020.