Moratorium Period Everything You Need To Know

Moratorium Period :

The moratorium period is an extended period given by the bank and financial intuitions to their customer who has taken a loan.
In the moratorium period, the customer is not required to pay any sort of interest to the lender for a specific time frame.

This kind of facility is specially provided in 2 major situations: Home loan and Education loan. The main reason to apply for a loan that he/she does not money, so the financial institution or bank tent to provide the specific time to recollect the amount and start paying after a period of time. But in the case of an education loan, the loan amount should be recovered from the income of the student either after the completion of education or even ongoing if the student is working apart and has no objection to paying the interest amount.

Who Is Eligible For EMI Moratorium?

Although the Moratorium period is provided on a specific set of loans due to the Covid-19 Pandemic many people lost their jobs,
family, and their source of income and were not even able to pay for their own living.
So the Reserve Bank Of India (RBI) had announced ( March 27, 2020,) a moratorium period of six-month starting
from March 1, 2020, and August 31, 2020.on all kinds of loans to ease the pain for the people, however,
it was up to the avail the benefit of the moratorium period.

How Does Moratorium Loan Work?

The borrowers who had applied for the moratorium period were not required to pay during that time.
When the moratorium period was in Effect, the interest is not waived off and will continue to
accrue on the outstanding amount. Meanwhile, the people were provided with an offer either the individuals
have to pay additional interest on the moratorium or extend the tenure of the loan or pay regularly
with a discount of 1% on the EMI amount.

Will Applying For A Moratorium Affect My Loan EMI?

Yes, it will, as mentioned above, the interest on waves on the Moratorium period is not completely waived
it is just an extended time provided by the RBI on the outstanding amount.
You will be liable to pay additional interest on months for which the moratorium period was in effect or you can pay by increasing
the tenure of the loan or EMI installment amount.

Will Moratorium Will Impact On My Credit Score?
As per RBI guidelines dated on MArch,27,2020 defaulting in paying for EMI on moratorium will not affect
the credit score or lead to a decrease in their Cibil score/credit score.


Advantages Of Moratorium:

  • One of the major advantages of the moratorium is it will reduce financial stress for those who are facing income
    uncertainty due to the coronavirus crisis.
  • In the case of the moratorium period, if you didn’t pay the loan installment amount it won’t be considered as default,
    so it won’t affect your cibil/credit score.
  • According to RBI guidelines of march,27,2020 banks are not to be charged any penalty for availing of the moratorium period.


Disadvantages Of Moratorium: 

  • The moratorium period doesn’t mean your EMI is waived, it is just an extended time given by the government
    you have to pay your EMI later. which means there will be an increase in either interest amount or tenure.
  • people have to pay a higher interest during the loan tenure if they have availed of moratorium facility
  • And, if you default two installments in a row after the moratorium you may have to pay the loan to an additional
    extended time or it will affect your cibil score.


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