📌 Introduction
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.
📘 1. What Exactly Is a Loan Moratorium?
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.
⏳ 2. When Is It Offered?
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)
💰 3. Impact on Interest and Loan Tenure
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.
⚠️ 4. Does It Affect Your Credit Score?
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.
✅ 5. Should You Opt for It?
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.
🔗 Useful Links – bit2050.com
🌐 Resources
❓ FAQs – Loan Moratorium
Q1: Is a moratorium the same as loan forgiveness?
No, a moratorium postpones payments, but you still owe the money.
Q2: Will my loan tenure increase?
Yes. Banks may either extend your tenure or raise your EMIs.
Q3: Can I apply for a moratorium anytime?
Only if the bank offers the scheme during specific circumstances.
Q4: Does interest accrue during the moratorium?
Yes. Interest never stops, even though EMIs are paused.
Q5: Can I repay during the moratorium?
Yes, and it’s smart to do so if you can afford it — to avoid interest piling up.
🧾 Final Thoughts
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.
Stay financially literate with more guides at bit2050.com – your go-to resource for crypto, finance, and wealth wisdom.
