Sat | Jul 4, 2020

Growth & Jobs | Consider a moratorium on your loans

Published:Tuesday | June 2, 2020 | 12:14 AM

HOWARD LAWRENCE, head of credit ­administration at JN Bank, says it makes good financial sense for persons who are facing economic hardships, due to the COVID-19 pandemic, to consider ­accessing a moratorium on their loan payments.

However, he cautioned persons who can continue to make their usual monthly payments to do so, instead of applying for a deferral.

“There is no decided advantage in anyone deferring their payments if they have the cash to make the payments,” Lawrence advised.

He was speaking during a recent interview on the JN Circle Catch Up online series organised by The Jamaica National Group. The series is part of JN’s efforts to assist Jamaicans to cope during and after the COVID-19 crisis.

A moratorium is essentially a deferral, or a temporary pause on payment, which is intended to ­alleviate financial hardship or ­provide time to resolve related issues.

“Therefore, this is where someone would come to us and ask for a break on their mortgage, auto loan or personal loan,” Lawrence explained.

He noted that this could be for a full or partial deferral, and stated that the JN Bank was offering its members up to a 12-month moratorium.

“For a partial payment, a member would say, ‘I have a reduction in my income and I can continue to pay a ­portion’. Or, ‘I can probably pay down my interest, but I won’t be able to pay down the principal portion of my loan’,” he explained.

Lawrence stated that under those circumstances, the person would be offered a reduced payment option for a limited period, such as, three, six or nine months.

“And, if the individual was laid off, and is completely without an income, then he or she would be offered a complete break on their loan payments for a specific period,” he informed.

Lawrence also noted that it was important for ­persons to understand the effect of a moratorium.

“You could have a moratorium and at the end of it, we capitalise the interest, which is to add it back to the loan amount. Then we would allow the member to make their original payment, which was agreed on at the beginning of the loan contract. However, for that to happen, we would need to extend the loan tenure,” he explained.

“The other option is to keep the loan tenure the same as what was originally agreed on; however, the member needs to appreciate that this would mean that the monthly payments would increase,” he added.

Lawrence also noted that many persons have opted for a blended option, in which they accept a short extension on their payments; therefore, the monthly sum may increase slightly, but not significantly.