Vehicle Loan Moratorium: 5 Things to Know

Find out the impact of a moratorium on your financing and discuss steps to reduce borrowing costs.

Are you planning to take a moratorium on your vehicle financing? Here’s what you need to consider before deciding to take up the option. 1. DOES THE AGE OF THE VEHICLE MATTER? It’s not advisable to take a moratorium if your vehicle is old and your income has not dropped significantly. As your vehicle gets older, it reduces in value. Taking a moratorium will extend your financing tenure. Hence, you will still be paying your instalment while the vehicle value continues to depreciate. You may need extra cash to pay off your financing balance if you decide to sell your vehicle before the financial tenure ends. 2. DO I NEED TO SIGN ANY DOCUMENT FOR THE MORATORIUM? You may need to sign additional documents depending on the product terms and conditions following the Hire Purchase Act 1967. 3. WHAT ARE MY PAYMENT OPTIONS AFTER THE MORATORIUM? Depending on your financial situation, you can either: - Pay the original investment amount, OR - Discuss with your bank to pay a lower or higher instalment. 4. WHAT HAPPENS IF I PAY A LOWER INSTALMENT AFTER THE MORATORIUM? Your financing tenure will be further extended if you pay a lower amount after the moratorium. However, your financing tenure will not be extended beyond two years unless you request a longer extension due to your financial circumstances. 5. WHAT ELSE SHOULD I ASK MY BANK? Find out the impact of a moratorium on your financing and discuss steps to reduce borrowing costs. Source: Financial Education Network