The COVID 19 crisis halted the economic activity of the country. Many business establishments temporarily closed their shops because of the lockdown. Most people stay at home and consequently lost their regular income.
The majority of the Filipinos struggled to survive this pandemic. It is even more challenging if they have monthly payments to make like paying for rent, utilities, credit cards, or housing loans.
Now, here’s the good news. Bank lenders can breathe a sigh of relief because loan payments, including payment of credit cards, are extended by another month.
The provisions of Section 4(aa) of RA 11469 or the “Bayanihan to Heal As One Act”. grants borrowers a 30-day grace period if the payment due date of their bill falls within the quarantine period, which is from March 15-April 30, 2020.
How does this work?
Let me illustrate in the following example.
NEW MONTHLY PAYMENT AND DUE DATE
- Example: Client A availed a 5-year loan from ABC Bank, which is going to mature on April 25, 2024. He has a monthly amortization of 25, 000.00, with the P24,000.00 applied for the payment of the principal amount and the remaining P1,000.00 for the monthly interest.
- Question: How much will Client A pay on the next due date?
- Answer: Client A should pay P26,000.00, representing the principal payment of P24,000.00 and P2,000.00 for interest for April and May. ?The client pays the regular monthly amortization on the succeeding months.
- Question: What is the new due date of Client A?
- Answer: May 25, 2020.
OPTIONAL INTEREST COMPUTATION
- Client A may opt to pay the extra interest (April) on a staggered basis based on the remaining maturity period of the loan.
- In our example above, the additional interest is computed as follows:
- Additional Monthly Interest = P1,000.00 / (4 years X 12 months) = P20.83
- Monthly Payment Due = Principal + Monthly Interest + Additional Monthly Interest
- Total Monthly Payment Due = P24,000.00 + P1,000.00 + P20.83 = P25,020.83
While banks are not strict in collecting the monthly amortization, this scheme works to their advantage. The extended credit term allows them to collect interest charges for the extra month. It is practical to pay the amount due as is to avoid the additional burden.
Financial institutions that violate the Bayanihan to Heal as One Act shall be subject to the corresponding penalties under RA 11469 and other existing laws and regulations. The new law takes effect starting April 2, 2020.