What is Moratorium Period in Personal Loan

How often have you applied for a loan and felt the pressure of having to pay it back in addition to other expenses? If this is something that worries or overwhelms you, then you may want to learn about the moratorium period – a window of leniency when your borrowed amount does not require repayment.

The moratorium period can be considered as a reprieve or breather given by lenders before borrowers begin servicing their loan payments.

Let’s take a closer look at what the moratorium period is and how it can help you in managing your loan payments.

What is Moratorium Period?

Moratorium period meaning refers to a pre-decided window of time, typically 6 months or more, where lenders grant borrowers relief from making their loan repayments. During this period, the interest amount still accrues on the unpaid principal but does not require any repayment until the moratorium period expires. This allows you to manage funds post-loan approval and settle other expenses before beginning regular repayment obligations.

This window varies with different lending institutions and depends on which loan type you have applied for. In some cases, banks may provide up to 24 months as a moratorium period depending upon the loan amount.

The moratorium period in personal loan is especially beneficial for those who are transitioning to a new job, facing pay cuts due to the present economic crisis, or need additional funds to make investments and spur their finances as well.

Advantages of Moratorium Period

The moratorium period has several advantages that can help you in managing your loan repayment responsibly:

• Granting of relief -

  During this period, borrowers don’t have to worry about regular repayments yet and can focus on other expenses and goals. This window allows them time for financial planning without any pressure from lenders.

• Repayment flexibility -

  After the expiry of this period, you can choose from various repayment options depending on your financial position. Lenders will offer you the best solutions to help you better manage your repayment obligations.

• Credit score -

  If chosen wisely, a moratorium period can be beneficial for those who are struggling with their credit scores and need a breather before they begin regular loan repayments.

Knowing these advantages, one should always keep in mind that delaying payments could lead to an increase in the interest rate of the unpaid principal amount and debt accumulation over time. Therefore, it is important to consider all aspects of the moratorium period before opting for it so that you don’t end up paying more than what was originally borrowed.

How to Request a Moratorium?

The request for a moratorium can be made directly to your lender either through an online form, letter or by calling customer care. During this period, you are required to provide documents such as income proof that will help the lender understand your financial status better.

You may also need to submit a request for restructuring of the loan amount and other details of repayment depending on your preference and present financial position. If applicable, the lender will review your situation and grant the moratorium period.

It is important to remember that the moratorium period should not be mistaken as a waiver, nor should you view it as an excuse to delay loan repayments indefinitely. Lenders have included this period in their offerings only to give borrowers a chance to better their financial positions. Therefore, it is advisable to use this window of leniency judiciously and responsibly.

Conclusion

Be smart when using the moratorium option – make sure it works for you. If it can help you pay off your debts better, then consider taking advantage of the moratorium period. On the other hand, if the existing loan terms are working in your favor and you don’t have any immediate financial obligations, then there is no need to avail this option.