EMI Moratorium: Relief or More Debt in Disguise ??

Do you know the whole truth about EMI Moratorium? What are the facts that no one is elaborating which the borrowers deserve to know before opting for Moratorium?


1. What is EMI Moratorium?

It means that borrowers can skip their payments which are due from 1 March 2020 to 31 may 2020. It includes (i) principal and/or interest components (ii) bullet prepayments (iii) EMIs (iv) credit card dues.

2. What are the benefits to the borrowers?

(i) Non payment will not impact your credit score.
(ii) The bank cannot declare you as a defaulter.
(iii) You don’t have to pay any late payment/charges.

3. But what are the losses to the borrowers?

As few banks have mentioned in their FAQs, borrowers will have to pay interest on the whole amount for the Moratorium period that means Moratorium is a facility to defer the payment and it should not be confused with interest waiver.

That’s not all, what no one is telling is; The interest calculated for the Moratorium period will be added to your principal amount and you will have to pay interest again on that interest, for the whole loan period.

Let’s understand this in detail with proper examples:

Loan Amount 5,00,00030,00,00050,00,00050,00,000
Interest Rate12%9.0%9.0%9.0%
Remaining Tenor (months)60120180240
Monthly interest rate1.00%0.75%0.75%0.75%
Interest for the first month5,00022,50037,50037,500
Principal O/s at the end of first month5,05,00030,22,50050,37,50050,37,500
Interest for the second month5,05022,66937,78137,781
Principal O/s at the end of second month5,10,05030,45,16950,75,28150,75,281
Interest for the third month5,10122,83938,06538,065
Principal O/s at the end of third month*5,15,15130,68,00851,13,34651,13,346
Tenure kept constant but EMI changed    
EMI for the increased principal (New EMI)11,45938,86451,86346,006
Increase in EMI (A)3378611,1501,020
Total excess payment over the 180 months60,6631,55,0682,06,9331,83,564
EMI kept constant but Tenure changed    
No. of EMIs required to repay the loan62.5124.5188.9256.1
No. of Extra EMIs to be paid (B)2.524.488.9016.13
Total Excess Payment (EMI * B)28,0091,70,1504,51,3357,25,693
(Source: emicalculator.net)

So, The people who are thinking that they will just have to pay the EMI three month later and the people who are thinking that they just have to pay 3 months interest extra; both are wrong. You have to pay a lot more than that !


Wait, what !! So where’s the benefit of so-called relief in that exactly??

Experts feel that the three months Moratorium on repayment on loans seems to be benefiting banks rather than borrowers, as they will have to pay accumulated interest through increased number of EMIs.


It seems like a double loss for borrowers as on one side income has been hit due to COVID-19 pandemic and on the other hand, there is a threat of increased debt and tenure if they opt for RBI relief measure.


Then why should I take the Moratorium?

You should take the Moratorium only and only if there is no other way that you can pay your EMI without taking another debt or loan. Releasing FAQs, Indian banks Association (IBA) said that borrowers whose incomes have not been impacted, should pay their EMI in time.


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5 thoughts on “EMI Moratorium: Relief or More Debt in Disguise ??

  1. So much useful information which was not clearly told by bank. Thank you team for sharing such important article.

  2. Great Information delivered by u guys. It is really helpful for me. Before reading this article i was confused about emi moratorium but now everything is crystal clear.

    Thanks to you VoucherDeakho Group.

  3. I was confused about EMI Moratorium but this article helped me a lot. Thanks Voucherdekho for sharing this.

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