Does an EMI moratorium waive interest?

No — interest continues to accrue during a moratorium. The accrued interest is added to your principal, increasing your total loan cost. A moratorium is a payment pause, not an interest waiver.

Should I take an EMI moratorium?

Only if you genuinely cannot pay the EMI. If you can pay, you should — moratoriums increase your total interest cost significantly. Calculate the additional interest cost before accepting a moratorium.

What Is an EMI Moratorium and How Does It Affect Your Loan?

What Is an EMI Moratorium?

A moratorium is a temporary pause on loan EMI payments, allowed by the lender. During a moratorium, you are not required to pay your monthly EMI. Introduced widely during COVID-19 in 2020 by RBI directive, moratoriums have since become a tool lenders offer in specific circumstances.

What Happens During a Moratorium

Critical point: A moratorium is NOT a loan holiday where interest is waived. Interest continues to accrue on your outstanding principal during the moratorium period.

The accrued interest is typically:

Added to the principal (increasing your total loan amount)

Extended through additional EMIs after the moratorium ends

This means you end up paying significantly more in total interest than if you had continued paying EMIs.

Moratorium Interest Calculation Example

Home loan: Rs 50 lakh outstanding, interest rate 8.5%, monthly interest = Rs 35,417

If you take a 6-month moratorium:

Interest accrued = 35,417 × 6 = Rs 2,12,500 (approximately)

This Rs 2,12,500 gets added to your principal. Now your loan is Rs 52,12,500 and you pay interest on this larger amount for the remaining tenure.

When Moratoriums Are Justified

Moratoriums are appropriate for: genuine temporary financial hardship (job loss, medical emergency, natural disaster), situations where not paying EMI prevents a worse outcome (defaulting on a critical bill), and truly short-term cash flow gaps (a delayed payment expected within 1-2 months).

When to Avoid Moratoriums

If you can continue paying your EMI, you should. The additional interest cost of a moratorium can be substantial.

Better alternatives:

Reduce EMI by extending tenure: Contact lender to restructure — lower EMI, longer tenure, total interest increase but less than moratorium.

Partial prepayment: If you have savings, use them to partially prepay instead of taking a moratorium.

Personal loan: A short-term personal loan at 12-15% interest to bridge a gap is cheaper than a moratorium on a home loan that extends for years.

Types of Moratoriums

Full moratorium: No payment required (principal or interest).

Partial moratorium: Pay only the interest component, not the principal.

EMI reduction: Reduce (not eliminate) EMI temporarily.

Always get moratorium terms in writing from your lender before accepting.