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Moratorium
A temporary period during which loan repayments are paused or deferred, typically offered during financial stress or at the start of a construction loan.
Moratorium can be of two types: (1) A lender-granted relief during financial stress — the RBI granted a blanket moratorium during COVID-19 in 2020. During moratorium, interest continues to accrue and is added to the principal. (2) A construction loan feature — principal repayment begins only after the construction period ends, during which only interest is paid.
Moratorium does not mean the interest disappears — it compounds and increases your total outgo. Always calculate the total cost before agreeing to a moratorium.
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