What Is Moratorium Period in Personal Loan?

Whatever the loan is, before opting for one, understanding its terms is vital. Have you heard of the term moratorium period? Yes, no, unsure? Well, knowing what this term is can help you plan your finances better and avoid unwanted surprises.

For the uninitiated, the moratorium period in loan is the specific duration which a borrower is not required to make EMI payments. The window is typically offered at the start of the loan tenure. The borrower gets ample amount of time before the repayment cycle begins.

What is moratorium period in laymen language would be, it is a break from loan repayments that can be incredibly useful during times such as job changes, medical needs, or starting a venture.

To explain it further, the moratorium period meaning can be described as a relaxation phase granted by the lender, which allows you to postpone your EMIs for a few months. While this sounds convenient, it's important to note that interest usually continues to accrue during this time. So, while you may not be making payments, the overall loan cost could increase.

How Moratorium on Loans Works

A moratorium on loans doesn’t mean a waiver. It simply allows a delay. Suppose you take a personal loan through the Kissht app. If the lender offers a three-month moratorium, your EMIs will begin from the fourth month. However, the interest generated in the first three months may either get added to your principal or be paid off separately, depending on the agreement.

For instance: you borrow INR 5 lakh at an interest rate of 12% per annum for a tenure of 24 months. If there is a three-month moratorium period, interest will accumulate during those three months. Using a personal loan EMI calculator, you can compare the difference in total repayment with and without the moratorium.

Why Borrowers Opt for Moratorium

A moratorium on loans can be a practical feature during uncertain financial situations. It gives breathing space and lets you stabilise your income before the EMI cycle kicks in. Students, for example, often benefit from this provision when they take education loans. Similarly, when applying for a personal loan, salaried individuals facing temporary pay cuts or relocation may find this useful.

During the COVID-19 pandemic, several banks and financial institutions extended moratorium periods to help borrowers stay afloat. This emergency arrangement showed how flexible lending terms can offer temporary relief, even though it adds to long-term costs.


Moratorium Period in Loan: Key Considerations

Before opting for a moratorium period in loan, evaluate these factors:

• Interest Accumulation: Even if you're not paying EMIs, the meter is still running. Understand how this will affect your total repayment.
• Impact on Tenure or EMI: The lender may extend your loan term or increase EMIs after the break. Know which structure suits your repayment ability.
• Credit Score Implications: Generally, availing a moratorium on loans doesn't hurt your credit score, but missing EMIs after the period ends certainly will.

How Kissht Helps Simplify This Process

Borrowers looking for clarity and convenience can benefit from tech-driven solutions like Kissht. The platform offers quick processing, paperless documentation, and straightforward terms. If you're unsure about how a moratorium period would affect your specific case, the Kissht app provides real-time updates and calculators that model EMI options with or without this window.

Another good part about Kissht is that it also specialises in instant loan approvals, making it a preferred choice for those in urgent need of funds. Even if your financial status changes mid-way, the app's support team can help assess eligibility for a moratorium on loans or provide alternative options.

Calculating EMIs Post-Moratorium

It is always a smart move to run the numbers. A personal loan EMI calculator becomes crucial when you’re considering a break in repayments. Enter the loan amount, interest rate, and tenure to see how different moratorium lengths change your EMI. Doing this will give you a clearer picture of affordability and assist in planning your monthly finances.

For instance, a one-time instant loan may seem convenient today, but if you are opting for a moratorium period, you must understand how it adjusts your payment schedule. The digital tools of Kissht make sure you make informed choices.

FAQs

Can I request a moratorium period after the loan has started?

It depends on the lender. Some may allow it during hardships, but it's subject to approval and may impact your repayment structure.

Will taking a moratorium affect my credit score?

Not really, if it’s officially granted and documented, then it doesn’t impact your score. Missing payments after the moratorium, however, can cause damage to your credit profile.

How long is the moratorium period typically?

It's up to the type of loan taken and lender’s internal policies. It can range between one to six months.

Is moratorium available for all types of personal loans?

Not necessarily; depends on the lender and the loan agreement. It is always recommended to confirm before applying if a moratorium period is offered.