EMI Reality Check: Should you defer payment on your home, auto and other loans? Know calculation here

Banks have given home loan, auto loan, education loan and other loan takers a three-month relaxation towards payment of EMIs or Equated Monthly Installments. What are the rules and regulations with regards to it and should the people with an EMI liability defer payments for this month? Expert Harsh Roongta, who is also a certified financial expert has answers to all your questions

Decision on EMI deferment also depends upon the bank the loan has been taken from as well as the terms and conditions of the loan agreement, Harsh Roongta says

Banks have given home loan, auto loan, education loan and other loan takers a three-month relaxation towards payment of EMIs or Equated Monthly Installments. What are the rules and regulations with regards to it and should the people with an EMI liability defer payments for this month? Will it be a right decision to discontinue your EMI payments and that too if you are in a position to pay them?

Zee Business guest Harsh Roongta, who is also a certified financial expert has answers to all your questions.

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Harsh Roongta says that there are no simple answers to this as people who are self employed may see problems in maintaining cash flow. For them, this could be a good option, he says.

The decision on EMI deferment also depends upon the bank the loan has been taken from as well as the terms and conditions of the loan agreement, he adds. Citing an example, he said that, normally, what happens is if the home loan is at 8.5%, then the deferment of the loan is also at 8.5%, though the Reserve Bank of India had not issued any instructions with regards to this.

In a Twitter poll run by Zee Business, 70% respondents were of the view that the loan takers should take advantage of the deferment option.

So, here is an EMI Reality Check - Should you really defer EMI payment?

The RBI has given relaxation on the payment of EMI between 1 March and 31 May and this is not a waiver.

So, assume you have a loan of Rs 50 lakhs for a 20-year period at an interest of 8.5%. If you are deferring the EMI payment for the month of March, then the interest on it will be Rs 35000 and the total amount payable at the end of April will be Rs 50.35 lakh. If the amount is deferred for April, then the interest will be Rs 35344 and the amount payable will now become Rs 50.70 lakh. And if the EMI for month of May is deferred, then the interest rate on it will be Rs 36000 which will take the total payable amount to Rs 51.06 lakh. So the interest for deferring payment for three months will be a whopping Rs 107000 which will be adjusted in subsequent installments.

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Zee Business has been telling viewers to defer EMI payment only if they are facing some financial crisis. However, know that any deferment will become a burden on the the borrower when he pays back subsequent EMIs. The loan duration will also become longer - by 3 months.

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