A moratorium period is a temporary pause on your loan repayments, granted by your lender under specific circumstances. It’s not automatic, and it’s not free of cost. This guide explains exactly how it works.
The Simple Idea
Sometimes life disrupts your ability to pay: a job loss, a medical emergency, a temporary income gap. A moratorium lets you pause your EMI payments for a defined period, without it counting as a missed payment or default.
Two Types of Moratorium
Pre-planned moratorium, built into certain loans from the start, common in education loans, where repayment doesn’t begin until after your course ends, plus a grace period.
Hardship moratorium, requested during your loan tenure, due to a genuine, documented disruption to your income or circumstances.
Does a Moratorium Mean You Owe Less?
No. This is a common misunderstanding. A moratorium pauses your payments; it doesn’t cancel them. Interest usually continues to accrue during this period, which gets added to your loan, meaning you’ll pay more in total interest over the extended tenure.
How the Extended Tenure Works
Your paused EMIs don’t disappear. Typically, your loan tenure extends by the length of the moratorium, so you end up repaying the same principal, plus the extra interest that accrued during the pause, just over a longer overall period.
A Worked Example
You have a loan with 3 years remaining, and you’re granted a 3-month moratorium due to genuine hardship. Interest continues accruing during those 3 months. Once the moratorium ends, your tenure typically extends to accommodate both the paused period and the added interest, meaning your loan now runs slightly longer than 3 years from this point.
When Can You Request a Moratorium?
This isn’t guaranteed or automatic. Lenders generally consider it for documented, genuine hardship. A job loss, with proof. A medical emergency, with bills. A natural disaster affecting your income. Simply wanting a break isn’t sufficient grounds; most lenders require real, demonstrable circumstances.
How to Request One
Contact your lender directly, as soon as you anticipate difficulty, ideally before missing any payment. Explain your situation clearly, with supporting documentation. Ask specifically about moratorium options, and get any agreement confirmed in writing.
Does a Moratorium Affect Your Credit Score?
This varies. A properly arranged, lender-approved moratorium is typically treated more favorably than a missed payment, since it’s a formal, agreed pause rather than a default. However, it may still be noted on your credit report in some form. Confirm this directly with your lender before assuming zero impact.
Moratorium vs Missing a Payment Without Approval
These are very different. A formal moratorium is agreed upon, documented, and doesn’t count as a default. Simply not paying, without any arrangement, leads to late fees, credit score damage, and escalating consequences. If you’re facing genuine hardship, requesting a moratorium is almost always better than silently missing payments.
Moratorium vs Loan Restructuring
A moratorium is typically short-term, pausing payments for a defined, limited period. Restructuring is a more permanent change, revising your EMI amount or tenure to match a longer-term shift in your repayment capacity. If your hardship looks temporary, a moratorium fits. If it looks longer-lasting, restructuring may be the more appropriate conversation to have with your lender.
A Quick Comparison Table
Factor: Moratorium; Missing Payment Without Approval; Formally agreed; Yes; No; Counts as defaultNoPotentially, if prolongedInterest still accrues; Yes; Yes, plus penalty interest; Credit score impact; Minimal, if properly arranged; Significant
What to Do When Your Moratorium Ends
Resume your regular EMI payments as agreed. Review your updated repayment schedule, since your tenure and possibly your EMI amount may have changed. If your original hardship hasn’t fully resolved, communicate with your lender again, rather than simply missing payments once the pause ends.
Frequently Asked Questions
Does a moratorium cancel my loan payments entirely?
No. It pauses them temporarily. Interest continues accruing, and you’ll eventually repay the paused amount, typically through an extended tenure.
Can I request a moratorium for any reason?
Generally no. Most lenders require genuine, documented hardship, a job loss, medical emergency, or similar disruption, not simply a preference for a break.
Does a moratorium hurt my credit score?
A formally arranged moratorium is typically viewed more favorably than a missed payment, though it may still be noted on your report in some form. Confirm specifics with your lender.
How is a moratorium different from loan restructuring?
A moratorium is a short-term pause. Restructuring is a more permanent revision of your EMI or tenure, suited to longer-term changes in your repayment capacity.
Should I get the moratorium terms in writing?
Yes. Confirm the revised EMI, tenure, interest treatment, fees, and credit-reporting impact before accepting the arrangement.
Conclusion
A moratorium can provide temporary relief when a genuine financial setback makes your EMI difficult to manage. However, it does not eliminate your repayment obligation; interest usually continues to accrue during the pause. Before accepting one, understand the revised EMI, tenure, and total interest cost, and get the lender’s terms in writing. If repayment trouble may continue, discuss restructuring or other options early rather than missing EMIs without approval.
Facing a temporary income disruption? Talk to TapTap about your options, including consolidation if multiple EMIs are involved.
