Moratorium

Loans & Credit

A moratorium is a temporary suspension of loan repayments granted by a lender. During moratorium, no EMI is due but interest continues to accrue and is typically added to the outstanding principal. Not an EMI waiver.

In detail

Types:n1. RBI emergency moratorium (COVID 2020): 6-month moratorium on all term loansn2. New loan pre-EMI period: for under-construction property, only interest paid until possessionn3. Negotiated moratorium: individual hardship cases -- job loss, medical emergencynnCost: Rs 50L loan at 8.5% for 6-month moratorium = Rs 2.125L added to principal. This extra Rs 2.125L at 8.5% over remaining 19.5 years = approximately Rs 4.1L total additional cost.

Formula

Monthly interest during moratorium = Outstanding principal x Monthly ratenPrincipal after moratorium = Original principal + Total interest during moratorium

Real-life example

🇮🇳 India example

Priya availed 6-month COVID moratorium on Rs 30L home loan at 8.5%. Interest accrued = Rs 1.275L. Added to principal = now Rs 31.275L. Over remaining 15 years at 8.5%, this extra Rs 1.275L costs Rs 2.4L in additional interest. Total moratorium cost: Rs 3.675L.