2 min read
05 Jan 2021

Taking a home loan to finance your home purchase is a big financial step. However, starting with the repayment almost immediately is not always a feasible option owing to your other monetary responsibilities. Additionally, you may want to defer your home loan repayment if you see a construction-related delay on your investing project. In these situations, you can benefit from the moratorium period on your home loan allowed by your lender.

What is a moratorium period?

A moratorium period is a duration when the borrower doesn’t have to make the home loan EMI payments. This means that you do not have to start repaying your home loan as soon as your loan gets disbursed to you. Instead, you can avail of an EMI holiday and begin paying EMIs after a break. Lenders offer this facility to help you plan your finances better to get acquainted with the lengthy obligation of a home loan in a more organised manner. Bajaj Finserv, for example, grants a 3-EMI holiday on a home loan up to Rs. 15 crore*.

What are the benefits of a moratorium period?

Having an EMI holiday or a moratorium period at the start of your home loan gives you ample time to plan your finances. During this time, you can plan your income and expenditure to consider your home loan EMIs. You can use the time to pay for other home-related expenses such as stamp duty, registration and brokerage, or simply save money for your subsequent EMIs. Additionally, a moratorium period benefits you by providing you enough time to switch jobs or fund the immediate expenses you incur after shifting into your new home.

Now that you know about an EMI holiday or a moratorium period, see how you can avail of this break on your home loan.

How to avail of a moratorium on your home loan?

The terms and conditions for the moratorium period on your home loan can vary across lenders. To avoid confusion and make the best choice, look for lenders that offer a good break during the initial years of the home loan tenor. Remember to compare home loan interest rates carefully as many lenders, to make up for this break, may increase the interest rate once the holiday period is over.

Once you have decided on your lender, speak to them regarding your needs and clarify all other charges and procedures in advance to ensure you get easy repayment terms through the entire tenor, even after the EMI break.

Apart from availing of a moratorium another way to enjoy paying lower EMIs is to opt for a variant such as a Flexi Hybrid home loan where you pay interest-only EMIs in the first few years (up to 4 years) of your home loan tenor. This also helps you adjust to EMIs conveniently and begin paying full EMIs once your income also increases.

Additional Read: 3 Simple steps for effective home loan management

Bajaj Finserv brings you pre-approved offers for personal loans, home loans, business loans, and a host of other financial products. Not only does this simplify the process of availing of financing, but it also helps you save on time. All you have to do is share a few basic details and check out your pre-approved offer.

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*Terms and conditions apply

Frequently asked questions

How many months are there in a moratorium period?

A moratorium period typically refers to a specific period during a loan's tenure when the borrower is not required to make regular loan repayments. The duration of the moratorium period can vary depending on the terms and conditions of the loan agreement and the policies of the lending institution. Commonly, moratorium periods for different types of loans can range from a few months to several years.

What is the meaning of a 3-month moratorium?

A ‘3-month moratorium’ means that the borrower is granted a period of three months during which they are not required to make regular loan repayments. This term is commonly used in the context of loans and financial agreements.

Can I stop my EMI for 2 months?

Whether you can temporarily stop or defer your EMIs for two months depends on your lender's policies, the type of loan, the reason for deferral, and your credit history. Contact your lender to discuss your situation and understand their specific terms and conditions. Keep in mind that EMI deferment can have implications such as accrued interest and a potentially extended loan term.

Can I pay EMI during the moratorium period?

Yes, you can choose to pay your EMIs during a moratorium period, even though it is not mandatory. Making voluntary payments can help reduce the overall interest cost of your loan, but keep in mind that interest may still accrue during the moratorium. Contact your lender to ensure payments are properly credited.

Can we cancel the moratorium period?

Yes, in many cases, you can cancel or opt out of a moratorium period if you initially chose to avail it but later decide to resume making regular loan repayments.

What are the disadvantages of the moratorium?

The disadvantages of a moratorium include:

  1. Accrued interest: Interest continues to accumulate during the moratorium, increasing the overall loan cost.
  2. Extended loan term: It may lead to a longer repayment period, resulting in higher interest expenses.
  3. Increased total costs: The accrued interest and term extension can raise the total cost of the loan.
  4. No principal reduction: The principal amount remains unchanged as you do not make principal repayments.
  5. Credit report impact: It could negatively affect your credit history.
  6. Potential legal issues: Breaching the loan agreement may lead to legal consequences.
  7. Delayed financial goals: It can postpone achieving financial objectives.
  8. Balloon payments: Some lenders may require a lump-sum payment at the end of the moratorium.
How much EMI will increase after the moratorium?

The increase in Equated Monthly Instalments (EMI) after a moratorium period depends on various factors, including the terms of your loan agreement and the specific conditions set by your lender.

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