Should One Utilise Moratorium Offered by Banks

Should One Utilise Moratorium Offered by Banks

Should one utilise moratorium offered by Banks

RBI has announced 6 months moratorium for loans which is applicable for credit cards also. Should one avail this or not? Let us analyze this step by step. If you are really in financial trouble, then this is fine but many people are not aware of the financial implication.

The main thing to remember is that it a deferment not the waiver. Interest will continue to accrue for this period. Your overall loan tenure and interest burden will increase significantly.

Loan details
Loan amount- Rs 25,00,000
Interest rate- 9%
Loan period- 20 Year
EMI- Rs 22,493
Total interest paid- 28,98,355
Plus, principal payment of Rs 25,00,000

If you utilise the mortarium period offered by banks, you will defer the payment of Rs 1,34,958 but your loan period will increase by many months and extra payment of interest will have to be paid.

It also depends on which stage of loan you are availing of the moratorium. In the below example we have assumed the moratorium period after zero, five, ten and 15 years of loan for 6 months moratorium.


Moratorium availed after (Years) Extra Interest (Rs) Extra Period (Months) Total Interest (Rs) Total Period (Months)
No Moratorium 0 0 28,98,355 240
0 7,85,550 41 36,83,905 281
5 4,19,694 25 33,18,050 265
10 2,07,322 16 31,05,678 256
15 79,132 10 29,77,488 250


Though you will have to pay extra interest but don,t forget that you have utilised the money for that period. Now you may take informed decisions about the moratorium.

CA Mukesh Gupta
CA Mukesh Gupta
Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

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