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A loan moratorium is a temporary pause or grace period during which borrowers are not required to make EMI payments. This concept gained wide popularity during the COVID-19 pandemic, but it applies in various financial hardship situations.
In this article, you’ll learn the 5 most important things about a loan moratorium, when to use it, and what risks it carries.
A loan moratorium is a deferment period offered by banks or financial institutions during which you are not obligated to pay EMIs. However, interest continues to accrue on the outstanding amount during the break.
It is not a loan waiver, and skipping EMIs under a moratorium doesn’t mean you don’t have to repay them later.
Loan moratoriums are typically offered during:
Natural disasters or pandemics (e.g., COVID-19 relief)
Personal financial crises (like job loss or medical emergencies)
Policy changes by the Reserve Bank of India (RBI)
During the moratorium, interest keeps adding up. Once the moratorium ends, banks offer two options:
Increase the loan tenure
Increase EMI amount
So, while it gives short-term relief, you’ll pay more in the long run.
If the moratorium is granted officially by your lender, it does not impact your credit score. But missing EMIs without approval will definitely hurt your CIBIL score.
You should consider a loan moratorium if:
Your income has been temporarily reduced or stopped
You’re facing a medical or family emergency
You’re juggling multiple debts and need breathing space
You shouldn’t opt for it just to free up cash for spending — remember, interest will pile up.
No, a moratorium postpones payments, but you still owe the money.
Yes. Banks may either extend your tenure or raise your EMIs.
Only if the bank offers the scheme during specific circumstances.
Yes. Interest never stops, even though EMIs are paused.
Yes, and it’s smart to do so if you can afford it — to avoid interest piling up.
A loan moratorium can be a financial lifeline in emergencies, but it’s not a free pass. Understand how it works, calculate the extra cost of deferred payments, and always check the terms with your bank.
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