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How to Choose the Best Extended Car Warranty

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Even the most common car repairs can be exorbitantly expensive. According to recent figures, the cost of replacing an engine and cylinders can run from $7,000 to $10,000, whereas replacing a hybrid car battery can cost upwards of $6,000. A new transmission can cost $4,000 to $5,000, and even a new head gasket will set you back an average of $2,000. The list goes on and on.

The best way to save yourself from the surprise cost of any of these repairs involves purchasing an extended car warranty as soon as you can. The problem is, there are almost too many car warranty companies competing to sell you a warranty policy, and some of those companies are less than reputable. It’s common for companies to charge more than these warranties are really worth, or to add a bunch of fine print to your warranty that can make it difficult to use.

To help you make sense of everything, we compared dozens of car warranty companies to find the absolute best. Not only did we focus on the inclusions of the warranties they offer, but we compared companies based on third party reviews, the fine print (which you definitely need to read), and more. Carchex came out ahead in our ranking due to their excellent user reviews and all the bonus features their plans offer from day one.

 

If you’re in the market for an extended car warranty, keep reading to learn how these companies fared in our study, what each one includes in their warranty products, and all the factors you should consider before you purchase an extended warranty for your vehicle.

Most Important Factors When Purchasing an Extended Car Warranty

Where can you use your car warranty? While the extended car warranty companies that made our ranking offer plans that can be used at nearly any repair facility or dealership nationwide, this isn’t always the case. Make sure to check any car warranty you’re considering to see if there are rules that can limit where you can get your car fixed and use your warranty coverage.

Ask about deductibles and waiting periods. Some auto warranties require a deductible, although it’s difficult to find out about deductible amounts and plan costs without getting a free quote. You should also ask about waiting periods some companies require before your warranty kicks in.

Check the fine print. Make sure to read over the fine print of your warranty so you know details like where you can get your car repaired. Some warranties only let you seek out covered repairs at participating dealerships and auto repair companies, but these companies may not even have a location in your area.

Know what is included in your extended car warranty. Finally, make sure you read over the plans each company offers in order to find out which components of your vehicle will and will not be covered. Each company is very specific on these details, so it’s not difficult to find this information on their company websites.

The Best Extended Car Warranties of 2020

Comparing companies who offer extended car warranties isn’t a ton of fun, but it’s crucial if your goal is winding up with the best warranty for your needs and your wallet. As you compare extended car warranty companies to find the right fit, we suggest starting your search with this list:

Company Highlights  
  • 5 levels of coverage
  • A+ rating from BBB
  • Great customer reviews
  • 30-day money back guarantee
Learn More
endurance car warranty
  • Tailored plans to suit your needs
  • Payment plans available
  • In-house administration
  • 30-day money back guarantee
Learn More
  • 3 tiers of coverage offered
  • A- rating with BBB
  • Great user reviews
  • 30-day money back guarantee
Learn More
liberty bell auto protect
  • 3 tiers of coverage offered
  • In-house administration
  • 30-day money back guarantee
  • Must have less than 140,000 miles
Learn More
infinite auto protection
  • 3 tiers of coverage offered
  • A+ rating from BBB
  • 30-day money back guarantee
Learn More
autopom car warranty
  • 4 tiers of coverage offered
  • A+ rating with BBB
  • Great user reviews
  • Cars must meet certain requirements
Learn More

Which Services Didn’t Make the Cut?

While extended car warranties can help you avoid pricey repair bills that can wreck your budget and force you off the road, keep in mind that not all companies in this space are reputable. For example, the car experts at Edmunds note that many extended car warranties aren’t what they seem, and that some hide behind loopholes and fine print to avoid having to cover repairs that should be included.

That’s why we compared companies for our ranking so carefully, and why consumers should do their due diligence to make sure they don’t wind up giving their money to a shady car warranty company. Cars are expensive on their own, so you shouldn’t waste money on a warranty that doesn’t work as intended.

Reviews of the Best Extended Warranty Companies

Ready to compare all the top extended car warranty companies head to head? The following reviews include the main details you should know about each company, as well as highlights and areas where they could improve.

Carchex

carchex car warranty

Carchex is an extended warranty company that is well known within this industry for the quality of their policies. They boast an A+ rating with the Better Business Bureau (BBB) as well as a 99% customer satisfaction rating. This company also has an average of 4 out of 5 stars across over 1,200 reviews on Trustpilot.

Carchex offers five different levels of coverage, each with more included repairs and longer available warranty timelines. Titanium coverage is their highest level of extended warranty coverage, followed by Platinum, Gold, Silver, and Bronze. However, you should note that all Carchex extended warranties come with 24/7 roadside assistance, towing, rental car access, gas delivery, and trip interruption insurance, among other perks. You can also get an instant quote online just by entering information about your vehicle and where you live.

Get Started With Carchex

Why Carchex Made the List: Carchex extended warranties come with more perks than many competing companies offer. This firm also has some of the best rankings and reviews from customers and third party ranking agencies. Carchex also offers a best pricing guarantee and a 30-day money back guarantee.

What Holds it Back: Like other car warranty companies that made our ranking, Carchex doesn’t publish any prices on their website. They also offer more plans than some competing companies, which is almost too overwhelming and confusing.

Endurance

endurance car warranty

Endurance is one of the most popular extended car warranty companies offering these products on the market today, and it’s easy to see why. This company offers a handful of plans that can suit any car warranty needs, and you can even pay for your warranty on a 36-month payment plan. You should also be aware that you can purchase a plan from Endurance once your car’s manufacturer’s warranty is about to expire, meaning you don’t have to have any lapse in warranty coverage.

Tailored extended warranty plans you can choose from include specific coverage for high mileage vehicles, basic plans with affordable coverage, and superior plans with more inclusions and longer coverage timelines. Also note that all extended car warranties from Endurance come with a one-year Endurance Elite Membership. This membership includes perks like roadside assistance, ID theft coverage, key fob replacement, tire repair and replacement, and more.

Get Started With Endurance

Why Endurance Made the List: Unlike some other companies that sell plans offered by third party warranty companies, Endurance actually administers its plans. That means you’ll purchase your extended car warranty from the same company that oversees your plan. Endurance also offers a 30-day money back guarantee on all of their plans.

What Holds it Back: Like some other extended car warranty companies, Endurance doesn’t hint at pricing on their website. You have to contact this company to get a quote. Also note that Endurance is not accredited by the Better Business Bureau.

Concord Auto Protect

concord auto protect warranty

Concord Auto Protect is another company that stood out in our study thanks to their excellent rankings and reviews. This extended warranty company boasts an average of 4.5 out of 5 stars from users on Trustpilot as well as an A- rating with the BBB.

Concord Auto Protect offers three extended warranty plans to choose from — powertrain coverage, an advanced plan, and a premium plan. However, you do have to call into the company or fill out an online form to get a free quote.

Another benefit of using this company is the fact that all their plans come with additional perks. Benefits you can look forward to include free roadside assistance, rental car coverage, and a 30-day money back guarantee.

Get Started with Concord Auto Protect

Why Concord Auto Protect Made the List: This company has excellent user rankings and reviews. They also administer the plans they sell, which means they are entirely accountable for sales and service.

What Holds it Back: Only their priciest extended warranty plan covers high tech electronic components that may be in your vehicle.

Liberty Bell Auto Protect

liberty bell auto protect

Liberty Bell Auto Protect is another highly rated company that offers extended car warranties that protect consumers from scary car repair bills. This company offers three easy-to-understand coverage levels with tiered inclusions — Platinum, Platinum Plus, and Platinum Prime. Also note that this company administers all of their warranty plans, and that they even have an in-house claims team.

Each plan from Liberty also comes with additional perks like 24/7 roadside assistance and a 30-day money back guarantee. You also get 100% parts and labor coverage while your car’s warranty is in effect.

Get Started With Liberty Bell Auto Protect

Why Liberty Bell Auto Protect Made the List: Liberty Bell Auto Protect offers three easy-to-understand plans, and they administer all of their warranties in house.

What Holds it Back: You can only buy a warranty from this company if your vehicle has less than 140,000 miles.

Infinite Auto Protection

infinite auto protection

Infinite Auto Protection made our ranking due to their excellent user reviews and their robust warranty plans. This company has an A+ rating with the BBB and mostly “excellent” reviews on Trustpilot. They have three plans to choose from — a basic foundation plan, a modern plan with more included items, and a prime extended auto warranty that covers most aspects of any car, including high-tech electronic components.

You do have to fill out a contact form or call into the company to get a free quote. However, you should be aware that Infinite Auto Protection plans do offer the option of monthly payments, and that you can use them virtually anywhere. Also included in every plan are rental car coverage, 24/7 roadside assistance, courtesy towing, and other perks.

Get Started With Infinite Auto Protection

Why Infinite Auto Protection Made the List: Infinite Auto Protection comes with included perks like rental car coverage and roadside assistance. They also have excellent user reviews and a top rating with the BBB, along with a 30-day money back guarantee.

What Holds it Back: Infinite Auto Protection doesn’t offer any information on pricing or deductibles on their website. You have to work with a customer service agent in order to get a quote for your vehicle.

autopom!

autopom car warranty

Finally, make sure to consider autopom! despite this company’s quirky name. This company has an A+ rating with the BBB for starters, but they also have an average of 5 out of 5 stars in their most recent reviews. This means their actual customers approve of their products and service, which makes it a lot easier for us to recommend them in our ranking.

autopom! offers four levels of warranty coverage — Powertrain Plus, Mid-level, High Level, and Exclusionary. Where the lower tier Powertrain coverage provides basic replacement and repairs when your powertrain and other major components break down, the top tier Exclusionary coverage is considered “full coverage” for your vehicle.

Customers should also be aware that all plans from this company come with rental car assistance, roadside assistance, a 30-day money back guarantee, and other perks.

Get Started With autopom!

Why autopom! Made the List: This car warranty company has excellent user reviews and plans to fit any warranty needs. They also offer affordable payment plans.

What Holds it Back: Autopom! requires cars to meet certain condition standards in order to qualify for their policies.

What You Need to Know About Extended Car Warranties

There are numerous advantages that come with purchasing an extended car warranty that provides coverage long after your car’s manufacturer’s warranty expires. For example, these plans can help you avoid the high costs of repair bills once your car starts aging and requiring ongoing repair work. Not only that, but the best extended car warranty companies make it easy to tailor your plan to include the types of coverage you want the most.

Unfortunately, there are some downsides to be aware of when it comes to purchasing extended warranties. For starters, these warranties can be expensive, and that’s especially true if you purchase top tier warranty coverage. While having a warranty can pay off in a big way if you do have an expensive repair need pop up, keep in mind that the opposite is also true. If your car runs fine and never has any big problems, an extended warranty will provide you with peace of mind but not much else.

Another downside of extended warranties is the fact that they don’t always cover what you need them to. These plans are typically loaded with fine print that can come back and bite you if you don’t pay attention, including some important limits on what is and what isn’t covered. Before you buy an extended warranty, it’s crucial to read the fine print so you know exactly what you’re paying for.

Speaking of fine print, it’s important to find out where you can get your car fixed if you do face a pricey repair bill. As J.D. Power notes, some extended car warranties only include a short list of approved facilities that will perform repairs covered by your warranty.

“If the vehicle breaks while on a trip, or if you move to a different region of the country while the warranty is in effect, such restrictions can render the warranty useless,” writes J.D. Power.

Our advice? Make sure you can use your warranty almost anywhere. If you don’t, you could wind up with a warranty you can’t even use.

How We Chose the Best Extended Car Warranties of 2020

Finding the best extended car warranties required us to research the plans each company offers and what they include. However, extended car warranties aren’t worth very much to consumers if the companies that market them make them difficult to use. With that in mind, here are the main factors we considered to help consumers find the best extended car warranties money can buy:

Excellent user reviews: Extended car warranties are nothing more than a written contract until you have to use them. With that in mind, we placed priority on user reviews from actual consumers who have purchased a car warranty and made a claim. All of the companies on our list have good or great reviews from previous and current customers.

Ease of Use: We also focused on warranty companies that let you use your warranty at nearly any repair shop or auto dealer. That way, you won’t be stuck with a warranty you can’t use if you move across the country or face a pricey repair when you’re traveling far from home.

Company Guarantees: We also gave preference to companies that offer an upfront price guarantee and/or a money-back guarantee. Most of the firms we profiled here offer a 30-day money back guarantee that lets you get a refund if you’re not satisfied.

Payment Plans: Finally, we looked for extended car warranty companies that offer payment plans. While it’s never fun to finance any purchase — and especially not a car warranty — payment plans let you enjoy the benefits of your warranty right away whether you have the cash to pay upfront or not.

Summary: Best Extended Car Warranties of 2020

carchex car warranty Learn More
endurance car warranty Learn More
Learn More
liberty bell auto protect Learn More
infinite auto protection Learn More
autopom car warranty Learn More

 

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When Will I Receive a Coronavirus Check? Here’s What IRS Says

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There’s a good chance you’ll have your coronavirus stimulus check in your bank account by April 14, according to a report by The Washington Post

The first direct deposits will be made April 9, according to an IRS draft plan obtained by The Post. Most payments would be available by April 14 at the latest, though the exact date will vary based on how quickly banks can process them. 

Paper checks would be mailed beginning April 24, at a rate of 5 million per week, according to the plan. Those with the lowest adjusted gross incomes would receive the first payments.

Most single adults who aren’t claimed as dependents on someone else’s tax return will receive stimulus payments of $1,200, while married couples will get $2,400. Families with children 16 or younger will receive a $500 credit per child

Benefits for single people with AGIs over $75,000 and married people with AGIs over $150,000 are reduced by 5 cents for every $1 they earn above these thresholds. 

For more information about how the payments will work, check out our coronavirus stimulus checks FAQ

When Will I Receive My Coronavirus Check?

OK, so the big question on your mind is probably: When will I receive my coronavirus check? Here’s the timeframe for payments, as reported by The Post:

April 9: The first direct deposit payments will be made. The majority of these deposits will be available by April 14 at the latest.

April 24: Paper checks will be mailed out to people with adjusted gross incomes (AGIs) of $10,000 or less who don’t have direct deposit information on file with the IRS.

May 1: Checks will be sent to people with AGIs of $20,000 or lower. Each week, another round of checks will go out to those whose incomes are within the next $10,000. So on May 8, checks will be mailed to those with AGIs of $30,000 or less. On May 15, they would go to those whose AGIs are $40,000 or less, etc.

Sept. 4: The final checks would be mailed to eligible taxpayers with the highest AGIs.

Sept. 11: Checks will be mailed to people who need to apply for payments because the IRS doesn’t have tax information available for them.

How Do I Sign Up for Direct Deposit?

If you haven’t signed up for direct deposit via the IRS or Social Security — or if the information they have on file is for a bank account you’ve closed — there’s no easy way to do so at the moment.

The IRS is building a web portal that would allow you to set up and update that information. The feature will probably be available by the end of April to early May, according to a memo from the House Ways and Means Committee.

If you haven’t filed your 2019 tax return yet, you could do so ASAP so the IRS has your updated bank account information.

If you’ve closed your bank account and the IRS tries to deposit your payment to that account, the funds will ultimately be sent back to the IRS. The IRS will eventually mail your check to your last known address if you don’t update your account information in the portal once it’s available.

Is There Anything I Can Do to Get My Check Faster?

There are really only two things you can do to speed up this process:

1. File a 2018 or 2019 tax return if you’re not receiving Social Security benefits.

2. Sign up for direct deposit or update your bank account information if you haven’t already once the IRS makes its portal available. Check https://www.irs.gov/coronavirus frequently, as that’s where the IRS is posting all key information related to coronavirus relief.

If you’ve done those two things, the only thing you can do is sit back and wait.

Robin Hartill is a senior editor at The Penny Hoarder and the voice behind the Dear Penny personal finance advice column.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.



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Best Interest Rates on Cash – April 2020

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The Federal Reserve further cut their target Fed Funds Rate to zero in March, so we continue to see a steady stream of rate drops on cash savings. I hope that some of you got a nice rate locked-in if you tried to refinance your mortgage.

Here’s my monthly roundup of the best interest rates on cash for April 2020, roughly sorted from shortest to longest maturities. I track these rates because I keep 12 months of expenses as a cash cushion and also invest in longer-term CDs (often at lesser-known credit unions) when they yield more than bonds. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 4/2/2020.

High-yield savings accounts
While the huge megabanks make huge profits while paying you 0.01% APY, it’s easy to open a new “piggy-back” savings account and simply move some funds over from your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7-month No Penalty CD at 1.70% APY with a $500 minimum deposit. Ally Bank has a 11-month No Penalty CD at 1.55% APY with a $25,000 minimum deposit. CIT Bank has a 11-month No Penalty CD at 1.70% APY with a $1,000 minimum deposit. You may wish to open multiple CDs in smaller increments for more flexibility.
  • CIT Bank has a few competitive term CDs at similar rates: 12-month CD at 1.86% APY ($1,000 min), 13-month at 1.82% APY, and 18-month at 1.85% APY.

Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, beware that many brokers pay out very little interest on their default cash sweep funds (and keep the difference for themselves). The following money market and ultra-short bond funds are not FDIC-insured, but may be a good option if you have idle cash and cheap/free commissions.

  • Vanguard Prime Money Market Fund currently pays an 1.07% SEC yield. The default sweep option is the Vanguard Federal Money Market Fund which has an SEC yield of 0.68%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 2.08% SEC yield ($3,000 min) and 2.18% SEC Yield ($50,000 min). The average duration is ~1 year, so there is more interest rate risk.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 2.57% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 3.16% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months. Note that the higher yield came from a drop in net asset value during the recent market stress.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes. Right now, this section probably isn’t very interesting as T-Bills are yielding close to zero!

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 4/2/2020, a new 4-week T-Bill had the equivalent of 0.09% annualized interest and a 52-week T-Bill had the equivalent of 0.14% annualized interest.
  • The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) has a 1.42% SEC yield and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 0.88% SEC yield. GBIL appears to have a slightly longer average maturity than BIL. Expect these yields to drop significantly as they are updated.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.

  • “I Bonds” bought between November 2019 and April 2020 will earn a 2.22% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More info here.
  • In mid-April 2020, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). Some folks don’t mind the extra work and attention required, while others do. There is a long list of previous offers that have already disappeared with little notice. I don’t personally recommend nor use any of these anymore.

  • The only notable card left in this category is Mango Money at 6% APY on up to $2,500, but there are many hoops to jump through. Requirements include $1,500+ in “signature” purchases and a minimum balance of $25.00 at the end of the month.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Some folks don’t mind the extra work and attention required, while others do. Rates can also drop to near-zero quickly, leaving a “bait-and-switch” feeling. I don’t use any of these anymore.

  • Consumers Credit Union Free Rewards Checking (my review) still offers up to 5.09% APY on balances up to $10,000 if you make $500+ in ACH deposits, 12 debit card “signature” purchases, and spend $1,000 on their credit card each month. Elements Financial has dropped to 2% APY on balances up to $20,000 if you make 15 debit card “signature” purchases or other qualifying transactions per statement cycle. Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Pen Air Federal Credit Union has a 5-year certificate at 2.20% APY ($500 minimum). Early withdrawal penalty is 180 days of interest. Their other terms are competitive as well, if you want build a CD ladder. Anyone can join this credit union via partner organization ($3 one-time fee).
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Vanguard and Fidelity both have a 5-year at 1.60% APY right now. Be wary of higher rates from callable CDs listed by Fidelity.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. Vanguard has a 10-year at 1.50% APY right now. Watch out for higher rates from callable CDs from Fidelity.
  • How about two decades? Series EE Savings Bonds are not indexed to inflation, but they have a unique guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). I view this as a huge early withdrawal penalty. You could also view it as a hedge against prolonged deflation, but only if you can hold on for 20 years. As of 4/2/2020, the 20-year Treasury Bond rate was 1.04%.

All rates were checked as of 4/2/2020.



“The editorial content here is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone. This email may contain links through which we are compensated when you click on or are approved for offers.”

Best Interest Rates on Cash – April 2020 from My Money Blog.


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Should you opt for the moratorium on Personal Loans?

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Amid the widespread panic and resultant losses due to COVID-19 pandemic, Reserve Bank of India permitted all banks and financial institutions to provide a 3-month moratorium on all term loans, including personal loans, as a temporary relief for those severely impacted by the health crisis and the lockdown.

What Does the Moratorium Mean?

The moratorium means that you are legally allowed to postpone the payment of your personal loan EMIs for the next 3 months with the due dates falling between 1st March, 2020 and 31st May, 2020. No penalty or charges will be levied for such a delay in payment however interest will keep accruing during this period.

How the Moratorium Will Affect my Loan Tenure?

Your repayment tenure for the personal loan will be extended by 90 days, if you opt for the moratorium. For example, if your loan was set to mature on 10th March, 2022, then it will now mature on 10th June, 2022.

Should I Opt For the Moratorium?

The answer to this question depends on the following two factors:

  • Effect of COVID-19 and the associated lockdown on your income;
  • The amount of interest that will be accrued during the 3-month moratorium.

If your income and cashflow has been severely affected because of the pandemic and it is not possible for you to pay the EMIs on the designated due dates, then you may take the benefit of this moratorium. However, it should be kept in mind that the EMI payment is only being delayed and not waived off. The interest will keep accruing over the moratorium period, and hence you will have to pay slightly extra later.

For example: Suppose you have an outstanding personal loan of Rs. 5 lakh at 18% p.a. interest rate at the time of the moratorium with residual tenure of 54 months. The following are

If you do not opt for the moratorium:

Total interest payable for 4 year 6 months loan tenure Rs. 2.33 lakh
Total amount to be repaid (Principal + Interest) Rs. 7.33 lakh

If you opt for the moratorium:

Extra interest incurred during the moratorium period of 3 months* Rs. 22,840
Interest payable over the remainder of the loan tenure (4 year and 6 months)** Rs. 2.33 lakh
Total amount to be repaid (Principal + Interest + moratorium period interest) Rs. 7.56 lakh

Note: * Extra interest incurred during the moratorium period of 3 months = 7500 (Month 1 interest) + 7613 (Month 2 interest) + 7727 (Month 3 interest) = Rs. 22,840

** As your loan tenure will be extended by 3 months as a result of the moratorium you still have to pay the interest incurred for the original 4 year 6 month remaining tenure of the loan = Rs. 2.33 lakh

***The above example is for illustrative purposes only and actual values/calculation method may differ from lender to lender.

Thus in the above case you have to pay an additional Rs. 22,840 in interest just for taking the 3 month moratorium on payment. This amount can be much greater if your loan amount and interest rate are higher too. In effect your personal loan interest cost can increase significantly if you opt for the moratorium.

Will the Moratorium Affect my Credit Score?

No, the moratorium will not affect your credit score. Any delay in making EMI payment during this period (1st March, 2020 to 31st May, 2020) will not be considered as a default by the credit bureaus Rating Agencies (CRAs), and hence your credit score will remain unaffected.

How Can I Opt for the Moratorium?

The following table summarizes the procedure to opt for the moratorium with respect to the leading Banks and Non Banking Financial Companies (NBFCs).

Bank/ NBFC How to Opt?
Axis Bank Visit the bank website and send an SMS/ email.
Bajaj Finserv Send an email at wecare@bajajfinserv.in.
Canara Bank -Either reply “No” to the SMS sent by the bank from the number 8422004008.

-Or, send an email to retailbankingwing@canarabank.com.

Central Bank of India Automatic enrolment on missing payment.
HDFC Bank -Call on 022-50042333 or 022-50042211 and follow the instructions.

-Or, submit your request on the bank’s website.

HSBC Bank Apply online by clicking here.
ICICI Bank Send an SMS or email to the bank.
IDBI Bank Automatic enrolment on missing payment.
IDFC FIRST Bank -Either send an SMS to 8007010908.

-Or, send an email to help@idfcfirstbank.com.

Kotak Mahindra Bank Send an email at pay.later@kotak.com.
Punjab & Sind Bank Automatic enrolment on missing payment.
Standard Chartered Bank Automatic enrolment on missing payment.
State Bank of India Send an email to opt for the moratorium.
UCO Bank Automatic enrolment on missing payment.

Conclusion

We advise you to defer your EMI payments on your personal loan by choosing the moratorium only if your income has been severely impacted or you want to stay conservative with your cashflow during the crisis. Otherwise, you should continue to pay your EMIs as per schedule. For those choosing the moratorium, do calculate the extra interest you would need to pay after the moratorium period.

Also Read: COVID-19 Loans in India

The post Should you opt for the moratorium on Personal Loans? appeared first on Compare & Apply Loans & Credit Cards in India- Paisabazaar.com.



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