According to the latest directive issued by the Reserve Bank of India (RBI), borrowers are allowed a 3-month moratorium period on instalment payment. This moratorium period on home loans borrowers is thus similarly applicable on EMI payment for the months of March to May. As a result, individuals have received relaxation from paying both the principal and interest component as EMI for 3 months.
However, notwithstanding the urgency of this instruction, there are some advantages and disadvantages of a moratorium on home loans in general. On the other hand, individuals often wonder whether opting for a moratorium on housing credit EMI is a viable financial option. Therefore, let’s consider some of the positive and negative consequences of choosing a moratorium period on home loans.
What are the Perks of a Moratorium on a Home Loan?
Applying for a moratorium period for a home loan EMI has its own set of advantages. Even though it is merely a ‘grace period’ or a ‘holiday period’, a moratorium has some short-term financial implications. Therefore, it is an efficient option for individuals who are facing some temporary difficulties to meet their home loan EMI obligations.
Moreover, some of the additional perks of home loan moratorium period include the following –
- A temporary relaxation – A moratorium period on home loan EMI works the best for individuals who have a shortage of current finances. They often face temporary cash shortages that make it difficult for them to maintain paying EMIs. As a result, they often experience worries regarding defaulting on their repayment liabilities.
To overcome this particular scenario; a home loan moratorium comes as way out. With this option, individuals can avoid defaulting on home loan EMI to prevent undesirable outcomes. It is especially so for the ones who are facing delays while receiving their monthly salary. Therefore, moratorium takes into account these unexpected occurrences and ensures maximum financial comfort, albeit temporary.
- Opportunity to manage short-term finances – In addition to temporary relief, moratorium also creates a financial opportunity. Thus, individuals can effectively manage their expenses related to purposes other than EMI repayment. It is possible that they can experience urgent and emergency needs that require immediate financial attention. Therefore, financing both the requirement and EMI payment proves to be an inconvenience.
A moratorium period thus provides a window of opportunity to channelise one’s finances in the most urgent direction. Besides, individuals can also opt for a moratorium period to accumulate excess funds to pay their EMIs in the subsequent months. Consequently, individuals can manage their short-term financial requirements and EMI payment with this beneficial process.
With the discussion on the perks of a moratorium on home loans, let’s move on to the drawbacks of this facility.
What are the Shortcomings of a Moratorium on Home Loans?
Moratorium period on home loans can also be associated with a handful of shortcomings. Since this facility is only a temporary relief, individuals do have to fulfil their repayment liabilities at the end.
Therefore, the prominent disadvantages of this moratorium include the following –
- The amount of interest on principal accumulates for the months that an individual does not pay home loan EMI. As a result, they ultimately have to pay EMI in a fresh month after the expiry of the moratorium period.
- The overall repayment amount increases that take an individual a longer tenor to pay back. Therefore, the amount of interest accruing as per the home loan rates increases by the end of the loan period.
However, a comparison between the perks and drawbacks suggests that an EMI moratorium is a beneficial option if you need to adjust finances immediately. There are many other benefits of moratorium period. Consequently, individuals can gain financially from moratorium periods, especially on high-value home loans like up to Rs.3.5 crore issued by reputed HFCs.
Besides, these lenders also provide pre-approved offers on a range of secured financial products such as home loans and loan against property. These offers additionally make for a time-saving and hassle-free approval experience. You can check your pre-approved offer just by entering your name and contact information.
As for moratorium on home loan EMI, it is a beneficial option to manage short-term finances. Additionally, this allows individuals to pay attention to other financial requirements that may be urgent to attend.