Is Moratorium Good For Home Loan?


A moratorium period is a period during a loan term when the borrower is not obligated to make a payment. It is a waiting period before the borrower starts making fixed monthly payments.

How is EMI paid in moratorium?

Borrowers who had the option to opt for this moratorium are now required to repay it. The repayment can be done either in lump-sum amount or borrowers can ask lenders to add these to their outstanding loan and increase the EMI for the remaining months.

Is interest paid during moratorium period?

The apex court furthermore directed that there shall be no interest on interest or penal interest on any amount during the loan moratorium from any borrower. … The moratorium was intended to provide borrowers relief during the COVID-19 pandemic, enabling them to defer payments on EMIs.

What is the moratorium rule?

The moratorium period, if granted, may be for a maximum of two years, and shall come into force immediately upon implementation of the resolution plan. The extension of the residual tenor of the loan facilities may also be granted to borrowers, with or without payment moratorium.

Is moratorium good or bad?

Deposits that a bank borrows at a certain rate of interest are lent at a higher rate of interest. Only when interest on loans is paid can interest on deposits be paid. Thus, not charging interest on loans under moratorium is a bad idea, especially when deposits remain a major form of saving for the common man.

How can I reduce my home loan quickly?

3 ways to close your home loan quickly

  1. Reduce Your Loan Tenure and Negotiate with Bank for Lower Interest.
  2. Increase EMIs with the Rise in Income.
  3. Build a SIP and do Higher Payment.

What are the disadvantages of moratorium?

Drawbacks of Home loan Moratorium

  • Opting for moratorium will have tax implications. …
  • Deferring two EMIs could extend your loan by 6 to 10 months.
  • The interest payable on the loan will be higher when compared to the current interest amount.

Can we stop home loan EMI for few months?

In cases where there is a break in the flow of income, you can approach the lender and request for an EMI-free period. Banks may give you a three- to six-month waiver on EMI payments in case you have lost your job or temporarily stopped your business operations, etc.

What is EMI full form?

An equated monthly installment (EMI) is a fixed payment made by a borrower to a lender on a specified date of each month. EMIs are applied to both interest and principal each month so that over a specified time period, the loan is paid off in full.

What is moratorium with example?

A moratorium period is the time during a loan term when the borrower is not required to make any repayment. … Education loans provide this feature. This is because education loans are repaid by students after they start earning. There might be a time lag between their completing studies and before getting a job.

Is moratorium interest free?

During the moratorium, borrower paid interest on the interest, or compound interest. This is because interest due every month got added to the total loan amount.

Does moratorium have interest?

The apex court said that banks will not charge compound interest or penal interest on any amount during the moratorium period for all borrowers, PTI reported. Along with this, the court has also rejected pleas by various trade associations to extend the loan moratorium that ended in August last year.


How can I clear a loan quickly?

Here are some ways to pay off a loan quickly:

  1. Set up a direct debit. …
  2. Make additional payments. …
  3. Cut back on expenses. …
  4. Increase your income. …
  5. Use your savings. …
  6. Debt consolidation. …
  7. Contact your lender. …
  8. Make an early settlement.

How do I repay my home loan smartly?

Smart Ways To Repay Loans: Here’s How You Can Lower Your Debt Obligation

  1. Repay high-interest loans early. Identify the loans that need to be tackled first, such as credit card and personal loans. …
  2. As income rises, increase repayments. …
  3. Convert to EMIs. …
  4. Use investments. …
  5. Make lifestyle changes. …
  6. The prepayment penalty.

Can I pay my home loan early?

Yes, lenders allow both full and part prepayment of a home loan. You can pay a certain portion of the outstanding balance and go with the same EMI afterward.

How moratorium will affect banks?

The banking sector has reported lower non-performing assets (NPAs) during the quarter ended September 2020, as the moratorium announced by the Reserve Bank of India (RBI) aided banks to show a decline in stressed assets.

What is the difference between moratorium and deferment?

A moratorium period, which is similar to forbearance or deferment, is when your lender allows you to stop making payments for a specific period of time and a specific reason. … The differences are that a moratorium period is much longer than a grace period and interest may be charged during it.

What are the advantages of moratorium?

It reduces your financial stress and gives you a breathing space to plan your finances better. You can use the moratorium period to plan your monthly income and expenditure to repay your EMIs. During this period, you can save funds for subsequent EMIs or pay for other expenses.

Who is not eligible for moratorium?

Any borrower whose aggregate of all facilities with lending institutions is more than Rs 2 crore (sanctioned limits or outstanding amount) will not be eligible for ex-gratia payment under the scheme. It may be noted that loans declared as non-performing assets as on February 29, 2020 are not eligible under the scheme.

Is a loan a moratorium?

As a relief measure for people in view of the coronavirus pandemic, the Reserve Bank of India (RBI) allowed a three-month moratorium on term-loan and credit card repayments. Lending institutions were directed to defer the EMIs of their customers opting for this moratorium scheme.

What is EMI in lockdown?

In the wake of coronavirus pandemic in the country, the Reserve Bank of India had in March announced a moratorium on repayment of EMIs and credit card dues for three months. The central bank later extended the moratorium period till 31 August.