Moratorium Period in Personal Loan: Meaning & Benefits

What You Need to Know About the Moratorium Period in Personal Loans?

A moratorium on Personal Loans can significantly ease your financial strain. While your payments are deferred, you must remain aware of its long-term implications. The RBI moratorium during the COVID-19 pandemic, for instance, allowed borrowers to delay their payments for up to 6 months. However, this period is no longer active, and moratoriums are granted on a case-by-case basis by lending institutions.

How to Make the Most of the Moratorium Period in Personal Loans?

If you're facing financial difficulties and need time to organise your finances, the moratorium period can provide relief. During this time, you won’t be expected to make regular loan payments, but interest will continue to accumulate. Here are a few tips to maximise the moratorium period effectively:

1. Build an Emergency Fund: Set aside a portion of your monthly income to build an emergency fund. This fund can help cover unexpected expenses like medical bills or home repairs without taking on additional debt.
    
2. Pay Off High-Interest Debts: Use this time to pay off high-interest debts like credit cards. Reducing your high-interest liabilities will improve your financial health in the long term.
    
3. Stay in Communication with Your Lender: It's crucial to maintain open communication with your lender. Let them know your situation and seek alternative repayment schedules or relief options.
    
4. Assess Your Financial Situation: Use this time to re-evaluate your financial health. If you're facing long-term difficulties, consider alternative financial strategies, such as consolidating debt.

Moratorium vs Grace Period: Understanding the Difference

It’s important to differentiate between a moratorium and a grace period:

• Moratorium Period: A temporary break from loan repayments, during which interest accrues and the repayment schedule is delayed. This is typically granted under special circumstances, such as financial hardship or national emergencies.
   
• Grace Period: A short period, typically 30-days, allows you to make the payment without facing penalties. After this period, penalties are imposed.

What Happens After the Moratorium Period?

Once the moratorium period ends, your loan repayments will resume. However, since interest continues to accrue, your EMI may increase, or your loan tenure might be extended. It’s crucial to stay in touch with your lender to ensure smooth transitions when the repayment schedule resumes.

Conclusion

The moratorium period can provide temporary financial relief, but it’s essential to understand its long-term impact on your loan. While it helps during tough times, the deferred payments will increase your loan balance, as interest will continue to accrue. It's vital to use the moratorium wisely by staying in contact with your lender and exploring debt repayment strategies.

If you are struggling with finances, a moratorium could offer breathing space, but ensure you have a solid repayment plan to handle the increased loan balance after the moratorium ends.

For more information on how a Personal Loan moratorium works, and to check eligibility, you can contact Hero FinCorp or visit our customer portal to explore repayment options.
 

Frequently Asked Questions about Personal Loans Moratorium Periods

• What is a Moratorium Period in a Personal Loan?

  The moratorium period is a timeframe during which you can postpone loan payments without incurring penalties. Interest continues to accrue, but the lender will not charge late fees.

• How long is the Moratorium Period for a Personal Loan?

  The moratorium period varies by lender. Typically, it can last from three to six months, but some lenders may offer shorter or longer periods based on specific circumstances.

• Can I make partial payments during the Moratorium Period?

  Yes, some lenders allow partial payments during the moratorium period. It’s advisable to confirm with your lender about any specific terms or restrictions.

• Does interest accrue during the Moratorium Period of a Personal Loan?

  Yes, interest continues to accrue during the moratorium period, which means the outstanding loan amount will increase. You’ll need to repay the principal along with the accrued interest once the moratorium ends.

• How Do I Apply for a Moratorium on My Personal Loan?

  To apply for a moratorium on your Personal Loan, you must contact your lender and request it, explaining your financial situation. Many lenders may offer online forms or customer portals where you can submit your application directly.

• Will My Loan Tenure Increase After the Moratorium?

  Yes, loan tenure may be extended to accommodate the deferred payments. This extension ensures your EMI remains manageable once the moratorium ends.