Loan moratorium extension: Everything you should know about impact and process | Mint

A loan moratorium is a period during which debtors are protected from having to pay Equated Monthly Instalments (EMIs) and other repayments. It temporarily suspends the repayment of a loan. However, the specific terms of a loan moratorium can vary significantly depending on the lender, the type of loan, and the circumstances leading to the moratorium. Let’s explore this concept and its consequences in more detail.

What are personal loans?

Unsecured personal loans provide the borrower with a one-time payment for a variety of personal expenses. In a personal loan, the borrower’s creditworthiness, income, and repayment capacity are considered, which is not the case with secured loans. Due to their flexibility, these loans are very popular, and they typically cover unexpected expenses, such as home renovations, medical emergencies, debt consolidation, or personal goals, such as education or travel.

What is a loan moratorium?

Such deferral of repayment is granted through a legally permissible timeframe called a loan moratorium. While this short period of relief aims to ease the financial strain, payment schedules are temporarily suspended rather than the loan being completely waived. This facility is particularly beneficial in situations such as an economic downturn, natural disasters, or personal financial crises.

How does a loan moratorium work?

The following acts are normally expected when a loan moratorium becomes effective:

In conclusion, moratoriums temporarily ease repayment burdens, providing the much-needed breathing space to see through tough times, avoid defaults, and mitigate disastrous financial consequences. However, a moratorium is not a long-term solution to financial instability, and this needs to be grasped.

(Note: Raising a loan comes with its own risks. So, due caution is advised)