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What Is Moratorium Period In Personal Loan?

A moratorium enables borrowers to delay interest & principal payments. Read on to know everything about moratorium period in personal loan at IIFL Finance.

3 Nov,2022 10:26 IST 477
What Is Moratorium Period In Personal Loan?

A personal loan can help people get out of a lot of tight spots, from unanticipated medical costs to necessary house repairs. It can also assist people in achieving lifestyle objectives like travelling overseas or purchasing the newest electronics products or home appliances.

A personal loan must be repaid to the lender with interest as per the specified repayment plan, just like all other loans. But what if the borrower experiences another crisis while the loan is being repaid and is unable to make the payments? Borrowers may request a moratorium term from their lenders in order to handle such circumstances.

Loan Moratorium

During a loan moratorium, the borrower is exempt from making equivalised monthly payments on the debt.

Many loans, such as those for education, have a moratorium period built in since payments often begin a few months after the course is over or when the beneficiary finds employment.

As a temporary measure of relief during times of generalised financial problems, the government or the Reserve Bank of India may also declare a moratorium.

For instance, the RBI permitted bankers to grant their clients a six-month deferral on making instalment payments on term loans, including retail loans, during the national lockdown for COVID-19 in 2020.

At the time, the majority of lenders also provided personal loan borrowers with a moratorium. However, borrowers can contact their respective lenders directly to take advantage of this provision for ordinary personal crises.

Loans Where Moratorium Is Permitted

Banks and non-banking finance companies (NBFCs) often permit moratorium on housing, educational, and agricultural loans. This facility is intended to help borrowers who may not be in a position to pay the EMI either in the initial period of the loan or any time in between during the entire loan tenor.
Zaroorat aapki. Personal Loan Humara
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For example, farmers may not be able to pay back the sum borrowed for seeds, fertilizers and farm processes until they harvest and sell their crops. Similarly, most students don’t start paying back their education loans before they get a job. Also, EMIs for some home loans begin only after the buyer takes possession of the house. This helps the homebuyers to avoid paying both a large EMI as well as the house rent.

Personal loans, in general, do not have any moratorium periods built into the debt agreements. This facility can be availed and provided on a case-by-case basis. Borrowers can ask their lenders for a moratorium on payments if they are struggling to cover their EMIs for a certain period. Lenders can offer moratorium at their own discretion.

Whether To Take Moratorium Or Not

A borrower should keep a few things in mind before requesting their lender for a moratorium.

• Borrowers should take a moratorium only when absolutely essential and when they can’t pay the EMIs.
• Borrowers should take a moratorium for the shortest period possible.
• Borrower will have to pay interest on interest during the moratorium because the loan keeps accruing interest during this period.
• Borrowers can choose to not take the moratorium even if the lender is offering it.


A moratorium offers borrowers reprieve during difficult financial circumstances. It enables borrowers to delay interest and principal payments without being considered in default. This provides personal loan applicants some breathing room and some time to organise their finances.

However, a moratorium only delays loan repayment for a set amount of time rather than waiving it altogether. The loan is increased by interest that was accumulated throughout the moratorium. This lengthens the loan’s term and adds to the weight of interest. Needless to say, if the borrower has the means to do so, it is always preferable to pay the EMI because the moratorium has a cost.

Most importantly, the borrower should take a loan only from a reputed lender like IIFL Finance that doesn’t charge usurious rates of interest, and customizes the loan repayments to match their income or cash flows.

IIFL Finance also offers flexibility in repayments and provides great customer service to ensure the borrowers manage to pay back their debts without any undue burden on their finances.

Zaroorat aapki. Personal Loan Humara
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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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