What is Moratorium Period? Know all things about this term 

Do you any knowledge about financial terms? Do you know what is Moratorium Period? If you are not aware of this, then here we share every essential factor about this.

The moratorium is termed as the temporary suspension which is beneficial for lenders as well as for the borrowers. These are very beneficial and help lenders and borrowers to save themselves from the financial crisis.

what-is-moratorium-period

How does it work?

The moratorium is beneficial for the lender and the borrower for resolving themselves for any crisis. The Moratorium is provided to get back into normal life.

As you know, after the earthquake, any natural crisis, droughts, floods, and severe disease outbreaks like covid, the necessary funds are granted by the government of any country, and this fund is lifted when the crisis is under control.

A recent example of the moratorium is the Coronavirus pandemic. To understand more about this, let’s check an example.

Moratorium Period Example

The latest Moratorium Period Example is the covid19 outbreak that left billions of people at risk. Almost millions of people are infected with this virus and lost their lives.

The virus affects the business industries and the lives of people. Many countries are suffering from this, and that’s why different countries have declared a lockdown in their countries.

The covid virus affected multiple industries globally and the local market and lowered down the countries’ economies.

Most of the countries are facing huge recession in their economy. So, different countries have different lockdown rules for which people have lost their jobs and income sources.

Along with this, some more services are closed like flight service, transportation services and all. To balance the situation, the government of India and the other countries stock the situation.

As a result, most of the countries said all money landing firms, like companies that offer finance for houses, the bank should provide a three-month moratorium to their borrowers.

The borrowers can pay their repayment of loans or interest rate after three months. As per the notice of RBI, the borrowers who are going through this Moratorium Period like principal or interest rate, equated monthly installments or EMI, and bullet repayments.

Do you know about the moratorium period?

When it comes to moratorium period then it is a period in which the borrower is getting some relaxation to make the payments dues.

You can also call this a period where a borrower can wait to repayment his/her dues. Before this period, all the repayment of EMI, Credit dues, and interest rates paused.

But after this period, everything is going fine and Normal, and the borrower should repay the amounts to the lending institutions like a bank or other financial firms every month.

The best example of this type of loan is Education loans. The loans for education are provided to the students, and they have to repay them after getting a job.

But getting a job may take some time after they complete their studies, and that’s why this period is beneficial to the students.

Moratorium Period: Is it beneficial?

After knowing what is Moratorium Period, it is essential to know that it is beneficial or not? Right!!

A moratorium period is a period in which the borrower can take his/her time to repay the amount to the lending firm.

That means if you are granted a moratorium period, then you don’t need to start paying your installments or interest dues. The moratorium period may sometimes be considered a burden for the borrower.

A person can repayment the interest rates in between the moratorium period because it can also help to minimize the rate of your dues.

This period is beneficial for those who lost their job in this covid period, who lost them every financial resource, and the students who face issues in getting the right job after completing their studies. So, overall we can say that this helps students and other age groups of people get peace of mind.

This is the time where the borrower can make his/her finance better. Especially this time period helps the students who have completed their studies this year or the last year.

Well, some lenders also grant moratoriums on home loans. If you also want to apply for this, then you can ask your bank or financial firms. If you are running a business and suffering from a huge loss, you can also ask for this to your ban and get relief from repayment.

How it differs from the grace period?

The moratorium period and grace period both are different. Both offer a certain time rate to the borrowers to allow one to make a credit payment within a certain time period. Here we list the basic differences:

  1. The major difference between the moratorium period and the grace period is that a grace period is shorter as compare to the moratorium period. As a result, huge interest will be charged in the moratorium period.
  2. When we talk about the Moratorium period, it has no guarantee, but this is the opposite in the grace period.
  3. When a lender or any financial firm offers the grace period for individuals who hold credit cards, then it is also necessary for every borrower. But in the moratorium period, the individual borrowers can make a request for that by visiting the banks, after that, a lender has all the power to grant any application or not.
  4. In a moratorium period, a borrower does not have to make a payment. But when it comes to the grace period, then the borrower can repay in between the grace period; otherwise, he/she will be penalized with a fine.
  5. The length of a grace period is up to 15 days, but in the moratorium period, it could take weeks or months.

In Conclusion

By concluding the overall thing, we can say that the moratorium period is far better than the grace period.

Well, everything has some pros and cons. So, the moratorium period has more pros as compared to its cons. Well, you can’t interchange these both because both are different and own different rules.

Hope you cleared your doubt regarding your query what is Moratorium Period!!!

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