Hai everyone, We all heard about the 3 months of EMI moratorium of Indian banks in the news. But many of us don't know what is moratorium ? Some of us misunderstood that the moratorium is the procedure of writing of loan a/c or EMI of loan. But it is entirely different from what we understood. If we apply for moratorium unless we know about it, we would have trouble. Lets see something about moratorium.
Moratorium and deferment are the two terms that we are discussing today... We are hearing these words nowadays. But these words are already using in the banking sectors and others too.. Moratorium means postpone a decision or program(a legal authorization to debtors to postpone payment.). Deferment have the same meaning too(the action or fact of putting something off to a later time; postponement.). So moratorium means just postpone the fixed monthly equated installments for a period. So its doesn't mean writing off your loan or emi. Before one year, like every common people, i just thought that banks are very kind to gave discount on loan but after studying this subject i got the clear picture on it.
Is moratorium good or bad..?
The answer of the above question depends on the your loan outstanding and your financial stability. If you are person who works very hardly to stabilize financial position, the moratorium will be very helpful to them if the income generating sources are limited or the financial situation of the loanee is going worse. But for the people who have the financial stability and continuous flow of income even in the inflation period, I would prefer to continue the repayment of their loan and close down the debt as soon as possible. If you take the advantage of moratorium, you have to pay more interest than you should actually needed to pay. While calculating the summary of accounts, you will realize that you got some losses.
How Moratorium works...?
Let me tell you with an example to understand it better.
Raju, a salaried employee took a home loan from XYZ banks. Due to some reasons in the economic sector, the inflation and unemployment rate increases and XYZ bank announced that there will be moratorium period for next 6 months. Loanees who needed that should inform bank about the same. Raju have the income to pay his EMI even this time but his wife says that " we can use emi money for the next 6 months for other purpose like tour etc, there will not be any problem with that because bank legally announces that". Thus Raju applied for the moratorium.
Raju's outstanding loan = 600000/-
Raju's EMI = 12748/-
Interest, if Raju continue emi for 6 months = 29018/-
This interest will be added to the principle balance in moratorium Rs. 629018/- and Raju needed to pay emi for the Rs.629018/- after moratorium. Actually he needed to pay interest on 629018/- instead of 600000/- which is more. .
In summary, Raju needed to pay only Rs.164893/- only as interest but he paid Rs.184581/- interest just because of taking the advantage of moratorium which is Rs.19688/- more. And the loan will close only after 4 more months which results because of the moratorium.
So guys, I personally recommend to financially stabled people that do not apply for the moratorium, just continue tour repayment, otherwise you will suffer the losses. Next, persons who are not financially stabled should apply for the moratorium, because if he did not apply for it and couldn't continue repayment, bank may impose fine on your emi, chances to raise the interest rate in your account or may be transfers it to the NPA- Non Performing Asset
Now , I think my readers understand the bank's moratorium very well. Then take your decision suits your condition. Wish all of you a good improvement financially.
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