About the Loan Moratorium Calculator

A loan moratorium is a temporary 'repayment holiday' during which a borrower is not required to make any EMI payments. This is typically offered by lenders during times of financial hardship, like the one offered by the RBI during the COVID-19 pandemic. While it provides immediate relief, it's crucial to understand that it is not a waiver. Interest continues to accrue during this period. This calculator helps you quantify the financial impact of availing a moratorium, showing how the accumulated interest increases your outstanding principal and, consequently, your future EMIs.

How Does a Moratorium Impact Your Loan?

During the moratorium period, the interest on your outstanding loan amount continues to be calculated. At the end of the moratorium, this accumulated interest is added to your principal loan amount. Your new, higher EMI is then calculated on this revised principal for the remaining tenure of the loan.

Frequently Asked Questions (FAQ)

What is a loan moratorium?

A moratorium period is a time during the loan term when the borrower is not required to make any repayments. It is a temporary deferment of EMIs. It is important to note that this is not an interest waiver; interest continues to be charged on the outstanding loan amount.

Is availing a moratorium a good idea?

It depends on your financial situation. If you are facing a severe cash crunch and are unable to make your EMI payments, a moratorium can be a lifeline that prevents your account from becoming a Non-Performing Asset (NPA) and protects your credit score. However, if you can afford to pay your EMIs, it is always better to do so, as a moratorium makes your loan more expensive in the long run.

Does a moratorium affect my credit score?

If the moratorium is officially offered by the lender (like the RBI-mandated one), availing it will **not** negatively impact your credit score. However, if you simply stop paying your EMIs without an official moratorium in place, it will be reported as a default and will severely damage your credit history.

What is "interest on interest"?

During a moratorium, interest is calculated every month. If this interest is not paid, it gets added to the principal. In the next month, the interest is calculated on the new, larger principal (which includes the previous month's interest). This effect is known as "interest on interest" or compounding, which is what makes a moratorium costly.