25 Nov - 3 min read
The Congress of Unions of Employees in the Public and Civil Services (CUEPACS) has urged the Finance Ministry and Bank Negara Malaysia (BNM) to consider extending the loan tenure for borrowers. This is in hopes that it will help ease some of the financial burdens faced by civil servants amidst the Covid-19 pandemic.
According to the president of CUEPACS, Adnan Mat, the maximum tenure of selected loans had been reduced following a directive issued by BNM back in 2013. “After the circular was issued, the repayment period for personal loans was shortened from 25 years to 10 years, while repayments on housing loans were brought down from 45 years to 35 years,” he said.
The central bank had justified its decision then as a move to avoid excessive household debt as well as to promote a sound and sustainable household sector. It was also meant to reinforce responsible lending practices by key credit providers. Both the revised maximum tenure for personal and housing loans are currently still enforced.
Adnan went on to explain that shorter loan tenures mean larger repayment sums for borrowers, which ultimately leaves them with smaller disposable income. As such, it would only make sense for banks to offer an extension on loan tenures.
“By extending the repayment period, borrowers would pay a smaller amount to service their loans, leaving them with more resources to spend on other necessities. Furthermore, those who took up housing or personal loans to start a small business would not have to worry so much,” said Adnan in a statement.
Adnan also added that borrowers can restructure their loans and pay an affordable amount to keep them from going bankrupt. This way, people will have more spending power, which in turn, could revitalise the economy.
At present, borrowers in need of financial aid can tap into the targeted repayment assistance programme that is being offered by banks. Introduced as a follow-up to the six-month blanket automatic moratorium that had ended in September, the programme provides aid in the form of extended moratorium, reduced instalments, and flexible repayment options for eligible borrowers.
During the tabling of Budget 2021 earlier this month, Finance Minister Tengku Zafrul Abdul Aziz also announced that the government will further enhance the targeted repayment assistance programme. Specifically, the enhanced programme will include additional repayment options for the B40, M40, and micro SME groups – slated to commence in December 2020.
(Source: The Star)
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