Loan Moratorium: Should I choose Moratorium for EMIs During COVID-19?
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Loan Moratorium: Should I choose Moratorium for EMIs During COVID-19?

Loan Moratorium: Should I choose Moratorium for EMIs During COVID-19?

posted on 2020-05-21 06:10:35 by Admin

Loan Moratorium: Should I choose Moratorium for EMIs During COVID-19? 

Reserve Bank of India (RBI) offers Loan Moratorium which authorizes the borrowers to defer EMIs for a certain time. To manage the liquidity crisis during coronavirus, RBI has now extended the loan moratorium for another 3 months until August 2020. Previously, in March, RBI allowed the moratorium was announced until 31 May

Due to the liquidity crunch, a borrower can opt for a loan moratorium and can pay once this period is over. Moratorium only allows you to defer the payment, it does not forgo the EMI. A personal loan moratorium is a lucrative option as it gives you a break from depositing EMIs. But, in the end, you will have to pay a higher amount. So, what should you do in this situation? Let’s check out more about moratorium benefits, moratorium calculator, faqs and much more.

Should I Go For Loan Moratorium During COVID-19?

During the pandemic, banks are in loop with customers if they are going for a loan moratorium. Some customers are taking this option to ease the current liquidity tension. The moratorium is optional to take. You can opt for 1-2 months only as well. Though, it should be kept in mind that it is a grace period not a waiver of the loan. So, you must make a decision wisely before going for the EMI Moratorium.




What are the options lenders giving to customers?

Banks are giving a variety of options to the lenders. They can choose what suits them best. These are the common options that may be available to you.

  • Option 1: You can pay the accrued interest in one go once the moratorium ends.
  • Option 2: Interest will add in the loan amount, it will increase the monthly EMIs.
  • Option 3: Your EMI may remain the same but the lender will increase the loan period.

Read: COVID-19 Loans by Public Sector Banks


What if You Choose a Loan Moratorium?

If you are opting for a moratorium, then you will not be a defaulter. You can relax for a while and can pay the EMI once the moratorium period ends. Along with that, you must keep in mind that the skipped EMIs will add to the loan amount. Hence, you will have to pay more interest later and chances of increased repayment tenure. The impact could be increased in EMI by 1.5-2% and loan tenure by 6-10 months.

Loan Moratorium Calculation


Month -1 Loan Outstanding



Monthly Interest @ 1%



Month -2 Loan Outstanding






Month -3 Loan Outstanding






Total Loan Outstanding



Should I choose Moratorium?

You should choose a moratorium option only if you really can't pay right now. If you have enough financial resources then pay the interest, as usual, to avoid burden later.


Can I take a Moratorium on Credit Card Bill?

No, the moratorium on credit card bills will cost you much higher as compared to loans. The moratorium is available on credit card balance but you may end up paying interest on interest not paid during the moratorium period. So, taking a moratorium on credit card bills is not a good idea. Banks usually charge 3-4% for the balance that is not settled. So, not paying during moratorium will increase this to 6-8%.


For example, your April credit card bill is INR 50,000 and spends another INR 20000, then @4%, the interest bill is 2800. Then spend another 20000 in May, then you will need to pay interest at 72800+20000 which will be INR 3712.

April Bill of Credit Card


April Expenditure


Interest - 1 @4%


May Expenditure


Total Credit Amount (if in moratorium)


Interest -2 @4%


Total Bill for June





How will I pay my Credit Card Bill during the liquidity crunch?

It is possible that due to liquidity crunch you are not able to pay the credit card bills. So, what you can do is ask your bank to convert into EMIs. This way you have to pay less monthly. The interest in these EMI is 12-18%. Though it is not cheap but will cost you less than 36-48% annual cost for rolling over credit card balance.

Check Out: 9 Ways to Manage Your Finances During COVID-19

Loan Moratorium Eligibility

The moratorium is available at a personal loan, home loan, education loan, etc availed from bank/NBFC. You can apply for it if you clear the eligibility. So the general criteria for COVID-19 Loan Moratorium are:

  • The customers who have availed the loan before March 1, 2020, are eligible to apply.
  • If your EMIs is due between March 01 - 31 May 2020 then you are eligible for the moratorium.
  • You must have a relationship with the financial institution for at least 6 months. Also, you must not have missed EMI earlier, though it gets relaxed as per case to case basis.

How to Apply for Loan Moratorium?

You can either opt-in or opt-out from the moratorium. In opt-in, you are applying for your request to allow relaxation for EMI. whereas in opt-out, you want to stop the moratorium. The steps for both are simple and can be done online easily. This is a standard procedure, the scheme applies to all the borrowers with no NPA. You have a unique bank process to opt-out from the moratorium.

  • First, visit the official website of your bank/NBFC.
  • Then, access the option for “Loan Moratorium” and fill in the details.
  • Once you apply, banks will reach out to you for the further process.


List of Banks offering Moratorium

This is the list of banks / NBFC who are offering moratoriums during COVID-19.

  • Axis Bank
  • Bajaj Finserv
  • HDFC Bank
  • ICICI Bank
  • Punjab National Bank
  • State Bank of India

Advantages and Disadvantages of Loan Moratorium

Loan moratorium is a good option to get respite from the current liquidity crunch. This way your neither credit score will be hampered nor late repayment charges are applicable.

Whereas, loan moratorium increases your monthly EMI or repayment tenure later. Which will add more financial burden if financial resources are not stable.


Q.Do I need to compulsory opt for a moratorium?

A.No, if you can pay the EMI, then opt-out from the scheme.

Q.Can I get a moratorium on credit card balance?

A. You can get a moratorium on credit card balance, though it is not advisable.

Q. I have missed my EMI before, Am I eligible?

A.Borrowers with NPA will not be able to get the benefits of the moratorium.

Q. Does the moratorium waive off my EMIs?

A. No, moratorium just gives you a relaxation to not pay EMI for a while. These will add to your outstanding loan.

Q. Does a moratorium affect my rating?

A.No, your credit score remains the same.

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