Individuals can defer student, car loan repayments in second COVID-19 relief package from MAS

Individuals can defer student, car loan repayments in second COVID-19 relief package from MAS

Singapore financial centre
A view of high-rise financial district office buildings from the Marina Bay promenade in Singapore. (Photo: AFP/Roslan Rahman)

SINGAPORE: Individuals will soon be able to apply to defer repayments for loans on industrial and commercial property, student, renovation and motor vehicles. 

This comes after a second relief package was rolled out by the Monetary Authority of Singapore (MAS) and the local financial sector on Thursday (Apr 30) to support those facing financial stress during the COVID-19 pandemic.

The first was announced about a month ago, allowing cash-strapped individuals to defer repayments for home loans and insurance premiums until the end of the year, among others. It also included support for small and medium-sized enterprises (SMEs).

The newly announced package will extend the scope of relief for individuals to other types of loan commitments and allow them to have continued access to affordable basic banking services, MAS said in its press release.

“As the economic outlook remains challenging and there continues to be significant uncertainty over the depth and duration of this downturn, the latest package of measures will provide further support to affected individuals,” it said.

READ: Individuals can apply to defer property loan, insurance premium payments amid COVID-19: MAS

Similar to the first package, these deferments will not be automatic and individuals will have to opt in with their respective banks.

Those who apply will not have to show how they have been impacted by COVID-19 to obtain these reliefs, MAS said. Their credit scores will also not be affected when they take up the deferments.

Applications for most of the new relief measures will start from May 6.

The central bank said financial institutions will aim to process all applications “promptly” but a high volume of applications “could lead to some delays”.

But as payment deferments and loan tenure extensions will result in higher overall interest costs, MAS cautioned individuals to consider these accumulated interest costs carefully and balance this against their need for temporary cash flow relief.

DELAY LOAN REPAYMENTS TO HELP EASE CASH FLOW

Under the second package, individuals with renovation loans or student loans that are not covered by the Ministry of Education can apply to have their principal and interest payments deferred until Dec 31 this year.

Interest will accrue only on the principal amount. No interest will be charged on the deferred interest payments, MAS said.

Those with motor vehicle loans and hire-purchase agreements can also approach their respective banks or finance companies to discuss suitable repayment plans on “a case-by-case basis”.

Factors that will be considered include the individual’s financial situation, need for the use of a motor vehicle, the current market value of the motor vehicle and its estimated market value after the deferment period when applicable.

READ: Insurers start receiving queries on deferment of premium payments amid COVID-19 outbreak 

Individuals can also opt to extend the loan tenure by up to the corresponding deferment period to ease monthly instalments when they resume regular repayments, the press release added.

In addition, those with commercial and industrial property loans may apply to defer their principal payments until Dec 31.

MAS said lenders will approve the request for deferment as long as the individuals’ loan repayments were current as at Feb 1, 2020.

Borrowers with mortgage equity withdrawal loans that are granted on or after Apr 6, 2020, may also ask to defer either the principal payment or both the principal and interest payments up to the end of this year.

For the latter option, interest will accrue only on the deferred principal amount. No interest will be charged on the deferred interest payments, MAS said.

Applications for the above loan types will start from May 6, except for the loan tenure extensions for existing debt consolidation plans (DCPs). These will be open for application from May 18.

Those eligible may apply to their banks for an extension of up to five years, MAS said, noting that this will help lower monthly instalment repayments.

REDUCING DEBT OBLIGATIONS, ACCESS TO BANKING SERVICES

Other newly announced measures include allowing those with investment property loans to apply to refinance or reprice their loans without being subject to the total debt servicing ratio (TDSR) and mortgage servicing ratio (MSR).

“Individuals can rely on this exemption to refinance or reprice their loans to lower their interest costs and debt obligations during this period,” MAS said, while warning individuals to consider contractual penalties that might be incurred if they refinance or reprice their loans within the lock-in period.

“Any subsequent applications to defer mortgage repayments for refinanced or repriced loans will be assessed by their bank or finance company on a case-by-case basis.”

Meanwhile, individuals whose incomes are impacted by the virus outbreak can apply to have service fees, which are typically charged when one fails to meet the minimum average daily or monthly balances in their retail bank accounts – waived until Dec 31.

Those who have set up GIRO arrangements for automated payment deductions, such as insurance premiums and electricity and phone bills, from their retail bank accounts can also apply to have bank fees waived for any failed deductions until the same period.

“This does not affect any action that payee companies may take for failed payments, including late payment fees, if applicable,” MAS said, noting that these moves are made to ensure access to basic banking services.

BANKS WELCOME NEW SUPPORT MEASURES

OCBC said in a separate media release that it started receiving moratorium requests for car, renovation, education, and industrial and commercial property loans in March. But given that there were no standardised relief measures for these loan types, each request was handled on a “case-by-case basis”.

Since then, the local bank has seen an increase in the number of customers seeking moratorium for their monthly repayments, with applications jumping by between 20 and 70 times within the past one month for each of the four loan types.

All the eligible requests have been approved, it said.

OCBC’s head of consumer financial services Sunny Quek said: “While the largest number of individuals asking for help are our home loans borrowers, we expect the number of moratorium requests for other loan types to continue to increase over the next few weeks, as the tightened circuit breaker measures continue to financially impact more people.”

Thus far, the bank has approved moratorium for S$4 billion in loans to individuals, mostly for home loans in Singapore, its statement said.

Over at UOB, it has received more than 6,000 applications for mortgage payment deferments and another 1,000 applications to convert outstanding unsecured loan balances to a new loan at a reduced rate, since the first support package was announced.

Around five per cent of requests from individuals have been on deferring payments for commercial and industrial loans, said Ms Jacquelyn Tan, head of personal financial services in Singapore.

“The second round of measures will provide more options for those facing financial difficulties to work with their bank on a plan to address their individual circumstances,” said Ms Tan.

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Source: CNA/sk

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