EMI Holiday

Full form: Moratorium Period

Loans & Credit

An EMI holiday (moratorium) is a period during which the borrower is not required to make loan repayments. Offered at loan start (for under-construction property) or during financial stress (like RBI's COVID-19 moratorium in 2020). Interest continues to accrue during moratorium.

In detail

Types:n1. Pre-EMI: for under-construction property, only interest paid on disbursed amount until possession, full EMI starts aftern2. COVID moratorium (2020): RBI allowed 6-month moratorium on all term loans, interest compounded and added to principaln3. Bank-negotiated moratorium: for job loss or medical emergency -- requires documentationnnCritical: moratorium is NOT an EMI waiver. Interest accrues and is added to outstanding principal. The loan becomes more expensive. Use only when absolutely necessary.

Formula

Principal after moratorium = Original principal + Accrued interest during moratoriumnAt 8.5% for 6 months: Rs 50L x 8.5% x 6/12 = Rs 2.125L added to principal

Real-life example

🇮🇳 India example

Rahul availed COVID moratorium on Rs 40L home loan for 6 months (8.5% rate). Interest accrued: Rs 1.7L. This was added to outstanding principal. His loan now effectively became Rs 41.7L. Over remaining 15 years, this extra Rs 1.7L costs approximately Rs 3.2L in total interest.

Frequently asked questions

Should I take a moratorium if offered? ▼

Only if you genuinely cannot pay. Moratorium is not free money -- interest accrues and principal increases. If you can pay EMI, keep paying. The 2020 COVID moratorium was widely misunderstood as an EMI waiver.