Moratorium on loan EMIs: All you need to know about

In March, the Reserve Bank of India offered the borrowers a relief measure in the form of an EMI moratorium on all term loans for three months until 31 May 2020. This was extended further by another three months till 31 August 2020. Between March 1, 2020, and August 31, 2020, the central bank offered a total of a six-month moratorium.

rn1. What is moratorium on loan EMI?rnThe Reserve Bank of India ( RBI), as a relief measure to help borrowers resolve financial difficulties caused by the pandemic, provided a six-month moratorium on all loans equivalent to monthly installments (EMIs) between 1 March 2020 and 31 August 2020. All loans, including home loans, personal loans, educational loans, etc., and credit card dues, were included in moratorium on loan. During the moratorium time, borrowers were not allowed to pay EMIs for their loans.

emi loanrn2. Who is eligible for EMI moratorium?rnAs per the RBI Circular of 27 March 2020, all individual borrowers were entitled to opt for the EMI loan moratorium, the loan of which was outstanding as of 1 March 2020.

moratorium emirn3. How does loan moratorium work?rnBorrowers who opted for a loan moratorium were not forced to pay EMIs during that time. Interest will not be waived off during moratorium time and will continue to accrue on the outstanding amount. In addition, individuals must pay extra interest for the months in which the EMI moratorium has been enforced.

4. How will opting for moratorium affect my loan EMI?rnAs stated above, interest on the loan will not be waived during the moratorium period and will continue to accrue on the outstanding amount. You will have to pay extra interest on the months for which EMI has opted for a moratorium, either by extending the length of the loan or by raising the amount of EMI’s installment.

5. How will loan moratorium on EMI impact my credit score?rnAs per the circular issued by RBI dated 27 March 2020, opting for an EMI moratorium will not adversely affect the credit score or lead to a credit downgrade for borrowers.