What you ought to Learn about MAS' Newly-Announced Bank Loan And Insurance Premium Payment Deferments

As a part of efforts to enhance the government's relief measures for individuals and firms to deal with the ongoing COVID-19 situation and resulting economic impact, the Monetary Authority of Singapore (MAS) announced a number of special relief measures to help individuals and SMEs cope with their existing debt obligations and insurance commitments.

These measures were introduced by MAS on 31 March 2021, together with the Association of Banks in Singapore (ABS), Life Insurance Association (LIA), General Association of Singapore (GIA), and Financial Houses Association of Singapore (FHAS).

In total, there are four measures which cover 1) mortgage repayments; 2) repayments on unsecured personal credit; 3) deferred premium payments for health and life insurance; and 4) flexible instalment plans for general insurance.

With the additional announcement on 5 October 2021 for more support in type of reduced instalment payment for mortgages, an extension of existing support measures and loan tenure extension for renovation and student loans. MAS has also recently released a comment on 24 June 2021 to provide extra time from the application deadline for the existing support measures.

Here's a glance at what each of these measures entail, and what Singaporeans need to know before deciding when they wish to take advantage of these measures.

#1 Deferred Repayment Of House Loans

Dubbed Special Financial Relief Programme (Mortgages), this provision applies to property mortgages, home equity loans, and credit card debt reduction plans for owner-occupied (HDB and private) and investment properties.

It allows borrowers to use for their respective bank or lender to defer either principal payment or both principal and interest payment.

During the time of deferment, interest will still still accrue, only on the deferred principal amount. No interest is going to be charged around the deferred interest payments – quite simply, interest-on-interest is waived.

After the deferment period, the remaining loan amount together with the interest accrued on the deferred principal amount is going to be fully-amortised (spread out) within the remaining loan tenure (no balloon repayment). Borrowers also have the choice to extend your finance tenure through the corresponding duration of the deferment period.

This deferment won't be reflected like a restructured loan in the borrower’s credit agency report.

This mortgage repayment deferment is granted on an application basis, and MAS has stated that lenders is going to be approving deferment requests “expeditiously”. Eligible borrowers will need to prove a minimum of a 25% loss in income or lack of employment after 1 February 2021 and aren't in arrears in excess of 3 months at the reason for application.

After applying using their respective bank or financial institution, borrowers will receive illustrations of the revised repayments during and after the deferment period, the extra interest which will accrue within the deferment period and revised total interest costs.

Borrowers should know that deferments and tenure extensions have the effect of upping your total interest costs, so you should avail you to ultimately this option if you want to – and just provided you need to.

As announced by MAS on 5 October, borrowers may apply to their respective bank or finance company to create reduced instalment payments pegged at 60% of the monthly instalment, for a period of up to 9 months. For many case, the 60% reduced monthly instalment will cover interest and partial principal payments. This will ease individuals' cashflow, while still allowing borrowers to pay down their principal amount.

[Update] MAS has released another announcement to increase support for people as of 24 June 2021. Eligible borrowers may apply for the lower instalment payments from which the deadline continues to be extended from 30 June 2021 to 30 September 2021. The lower instalment payment might be for up to 9 months although not exceeding 31 December 2021, starting from the date the application qualifies. Additionally, a loan tenure extension of up to 3 years may also be discussed with the respective lenders.

#2 Converting Personal Unsecured Credit Balances Right into a Term Loan With Lower Interest

Referred to as Special Financial Relief Programme (Unsecured), this provision pertains to credit card debts along with other revolving lines of credit with banks and credit card issuers.

Those who have outstanding balances on their own charge card or other unsecured credit facilities in arrears between 30 to 90 days in the reason for application, can apply to their respective lenders to convert what they owe into a term loan, which will have interest capped at 8% per annum and a maximum tenure as high as 5 years. This is reduced than the 26% per year typically charged for outstanding charge card balances.

This choice is only accessible to Singapore Citizens or PRs who suffered a lack of 25% or even more in their monthly income after 1 February 2021, and are thus at risk of incurring substantial arrears.

Individuals can use to their respective lenders for conversion of their outstanding unsecured debts anytime from 6 April to 31 December 2021. MAS has said that requests will be processed and granted “expeditiously” by lenders which this conversion won't be reflected like a restructured loan in the borrower's credit bureau report.

[Update] The applying period continues to be extended from 30 June 2021 to 30 September 2021.

It is essential to notice that the unutilised borrowing limit with the respective lenders won't be open to borrowers following the conversion until the loans are cleared, which makes sense, since the reason for the conversion is to protect consumers from being mired in a vicious circle of high-interest debt.

Obviously, consolidating high-interest loans like charge card debts into lower-interest loans with a sustainable repayment schedule is the logical thing to do. Before this special conversion programme, borrowers could use charge card balance transfer promotions or even take a unsecured loans.

Typically, a good practice for borrowers to minimise the quantity of great interest paid would be to pick the shortest loan tenure that will still allow then to comfortably service the monthly repayments.

However, because of the uncertainty from the COVID-19 situation and the fact that this special term loan includes no early repayment penalty, borrowers could consider stretching your finance tenure, as long as they are disciplined enough to pay for down much more of the money they owe as quickly as they can manage.

#3 Deferred Payments For Life And Health Insurance Premiums

To help policyholders who might be facing financial hardships not lose their important health and wellness insurance policy, MAS has announced that folks can apply to their insurers to defer premium payments for approximately 6 months while keeping insurance policy during the deferment period.

This deferment option pertains to all individual life and medical health insurance policies having a policy renewal of premium deadline between 1 April and 30 September 2021 and can be susceptible to insurers' assessment and approval.

This measure adds another option open to Singaporeans to have their protection costs manageable and sustainable during periods of monetary distress, for example taking a premium loan, changing their policy to some paid-up one, or reducing their sum assured.

The deferment of payment for insurance costs has been extended. You might affect defer premiums for approximately six months for policies with renewal or premium deadline between 1 April 2021 and 31 March 2021 (both dates inclusive). Only policies which are not already on Defer Premium Payment are eligible.

#4 Flexible Instalment Plans For General Insurance

To ease the financial burden for all those spending money on general insurance plans, for example car insurance policy and property insurance, policyholders can apply their insurer to work out an instalment payment plan, while keeping insurance protection for paid-up period.

This allows policyholders to pay their premiums in smaller amounts and enjoy coverage for the paid-up period, rather than needing to pay a lump sum payment of premiums for the whole policy period in the beginning.

Policyholders can approach their respective general insurance provider to find out more.

#5 Loan Tenure Extension For Renovation and Student Loans [New]

To ease the money flow burden and lower monthly instalments, individuals with renovation and student education loans may apply to their respective bank to extend your finance tenures by up to Three years. This is readily available for renovation or student loan with payments that are not more than 90 days past due, regardless of whether they've adopted payment reliefs previously. The student loans measure covers all non-MOE student education loans.

The application period for eligible borrowers has been extended from 30 June 2021 to 30 September 2021.

Flexibility And Sustainability For Tiding Over This Difficult Period

These measures are timely and will also be much appreciated by those whose income and finances continues to be adversely impacted by economic fallout from COVID-19.

It can also be in the banks' and insurers' interest that flexibility is owned by clients. In the end, the very last thing insurers want is really a wave of policy cancellations due to temporary financial hardship, or banks needing to write-off money owed or spend some time and/or money to try to claw back whatever they can from borrowers.

With the additional flexibility, individuals can continue to fulfil their obligations to banking institutions, while enjoying the benefits of continued use of credit and insurance coverage.