Car Loan Payment Holiday Due to COVID and The Accrued Interest

Do you have a car loan? Home loan? Any bank loans?
Early this month, nagkagulo sa car club FB group namin because of the realization that delaying our car loan payments on the bank who offers grace period would result to ACCRUED INTEREST.

The problem really is the fact that on the news, we are only informed of Section 5.01 of the Bayaniyan Heal As One Act where loans are given 2 months grace period. Everyone thought that we'll literally skip the loan payment without penalties and fees, without realizing that it would still have accrued interest.

Here's an excerpt of the Bayanihan Act's Section 5.02 talking about accrued interests.

The Problem

1. Everyone thought that it is really a payment holiday. As in you could skip 2 months of payment and that you will just have to extend your due date. For example, if your loan should originally ends on July 2021, availing of the 2 months holiday pay means your loan maturity would be moved to September 2021. Which should've been if not for the accrued interest. Look the BDOs' table below.

2. Most banks AUTOMATICALLY enrolls you to the payment holiday. Like for me, I am on auto-debit payment scheme on my bank. I noticed that they did not charge me for the April amortization. Initially, I disregard it since it I thought there will be no effect on my payment. But based on the discussion on our car fb group, that is not the case.

3. Accrued interest is actually a huge amount of money. Just look at the screenshot below. Extending your loan maturity date by 2 months means a whopping 16K PHP of interest! Like deym! That is no joke.

4. If you don't want to avail of the payment holiday you have to coordinate with your bank ASAP, else they will ASSUME that you don't want to pay. Which is crazy because honestly, with their limited manpower now, it is super difficult to call the banks.

What you can do

1. If you have the capability to pay, pay now! Do not delay your payment. It would only mean paying more which we all don't want.

2. If you are enrolled on the auto-debit scheme or post-dated checks, you have to coordinate on your banks to make sure that they process the payments on time.

3. Your payments could be deferred and the due date is extended by 60 days so you should not pay for penalty fee or delayed payment charges. Just make sure you do not extend your loan maturity date.

4. If you do not have the capability to pay, this delayed payment scheme is a good option. Coordinate with your bank and ask details about the accrued interest totals, and installment fee option if they do offer it. Most banks do.

I am sharing this to everyone so as to make sure that you know what you are getting into. It is already a difficult time, and having to pay more for our loans is an added burden we all don't want to have.



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