A moratorium is a temporary postponement of an action by formal agreement. This means that if a policy is announced by the country’s banking regulator, borrowers can stop paying their EMIs for the duration of the moratorium.
If banking regulators impose a moratorium on loans, those who cannot write off their EMIs for the moratorium period will not be classified as defaulters.
The moratorium is an important aspect of certain types of loan products, for example, education loans. As the loan amount can be repaid only after the students go to work, banks give them the time they need.
As it is a temporary suspension of an activity, a moratorium is declared for a specific period of time, which is called a moratorium. A moratorium for a home loan means that you do not need to write any EMI amount.
RBI announces these periods as a relief measure to borrowers who are in a difficult situation due to some economic problem. You can opt for non-repayment.
Some other types of loans like education loans also impose a moratorium on borrowers before paying the EMI. Once the moratorium is over, the outstanding amount must be repaid.
Although a moratorium is also convenient to choose the period, the borrower must understand that the interest must be paid during the grace period. This is monthly, quarterly, and simple interest.
If the borrower decides to defer the entire amount, the interest charged during the holiday periods will be adjusted in monthly installments and added to the total amount.
Usually, the interest can go up to 10 percent of the total principal amount plus the interest charged. In this offer, the developer pays the interest on behalf of the buyer for the duration of the holding.