GRACE PERIOD FOR LOAN INTEREST RATE PAYMENT TO CURB RISING COST OF LIVING
Due to the unfavourable economic climate that the world is facing, Malaysians are today being advised to tighten their belts and companies are retrenching workers due to the economic slowdown especially in the Oil & Gas and commodity sectors. In light of this, Malaysians are looking for additional source of incomes or jobs with a higher paying salary to improve their quality of life. Those retrenched are now out looking for jobs to support their family and settle their monthly commitments i.e. housing loan, car etc. The combination of rising cost of living and the current unfavourable economic climate is a recipe for disaster.
Unfortunately, for people or families that do not have any options, they resort to maximising their credit cards, taking loans from friends or worse illegal Ah Longs. This result in an increase of personal debt which is not sustainable and will eventually lead to bankruptcy, auction of properties, increase in crime rate and worst among all is contemplating suicide due to the enormous pressure that is being faced by certain segment of the society.
In fact, the risk for people to default on their loan will also be higher since they can’t afford to do so due to the rising cost of living. This would significantly raise the cost of living further since it will be much more expensive for defaulters to take loans since they would need to pay higher interest rates. In fact, if a high number of Malaysians default on their loans, interest rates in the country would rise, increasing prices and contributing to inflation. This we must avoid at all cost.
HOW TO ASSIST THE RAKYAT?
Personally, I would like propose that together with the BR1M assistance that is currently being provided by the government under the leadership of Datuk Seri Haji Najib Bin Tun Abdul Razak, the government can work together with banks to waive interest payments for 3 years for certain loans such as Personal, Housing and Vehicle loans.
This means that bank only collects the monthly payments on principal and not interest. This in return will provide families with a higher liquidity as they will have extra money to spend for their monthly expenditure.
WHY INTEREST RATE PAYMENT AND NOT PRINCIPAL RATE PAYMENT?
Based on the research that I have done, we take an example a Flexi Home Financing – Islamic from a local bank, the payment for a RM 170,000 housing loan for 30 years will result in payment of principal RM 231.38 and interest of RM 693.71 monthly. If our local banks can provide a grace period of interest payments for 3 years, the rakyat and their families will have an additional of RM 693.71 to spend monthly.
I am aware that with this recommendation, banks will be reluctant as this will mean that banks will lose out on their income. However, this can itself be avoided if a concession is being made such as that the tenure for loans is extended by 3 years since the grace period of interest is being done for 3 years.
I am sure all parties i.e. the government and banks can come to an agreement for a win – win situation for all parties, especially the rakyat who are now struggling to survive.
The entry to this program could be for families earning RM 10,000 and below as this are the majority of society that has quite a big monthly commitments with respect to loans with bank etc. I hope the government will consider this proposal for the benefit of the rakyat.
PRESS STATEMENT BY
Dato Seri S.Vell Paari
CWC Member
Malaysian Indian Congress
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