What is the Moratorium Interest?
A moratorium is a lender-approved pause on EMIs — offered during job loss, a course of study, or events like the 2020 COVID relief. The critical point is that interest keeps accruing on the outstanding balance and gets capitalised, meaning it is added to your principal.
You then pay interest on that interest for the rest of the loan. A short pause can therefore cost far more than the EMIs you skipped.
Formula & worked example
The balance compounds monthly through the pause:
Interest added = Balance after pause − P
Worked example: ₹25,00,000 at 9% with a 6-month moratorium → balance grows to about ₹26.15 lakh, adding ₹1.15 lakh. Because that sits in the loan for 15 more years, the total cost rises by roughly ₹2.1 lakh — the equivalent of about 4.5 extra EMIs for a 6-month break.
How to use this moratorium interest calculator
- Enter your current outstanding and rate.
- Set the moratorium length your lender has offered.
- Read "Interest Added" — this is what capitalises into your loan.
- Compare "Equivalent Extra EMIs" against the EMIs you would skip to judge whether it is worth it.
Smart tips
- Take a moratorium only for genuine hardship. It is emergency relief, not a cash-flow convenience.
- If you can pay the interest portion during the pause, do — it prevents capitalisation entirely.
- Ask whether the lender extends the tenure or raises the EMI afterwards; the two have very different cash-flow effects.
- A moratorium is normally reported to credit bureaus as a restructure and can affect future borrowing.
- Resume EMIs the moment income returns, even mid-moratorium, to limit the compounding.
Frequently asked questions
Is a loan moratorium free?
No. EMIs pause but interest accrues and is added to your principal, so you pay interest on that interest for the remaining tenure.
Does a moratorium affect my credit score?
An approved moratorium is not treated as a default, but it is usually flagged as a restructure and may be visible to future lenders.
Should I take a moratorium if offered?
Only if you genuinely cannot pay. Compare the "extra total cost" above against the relief — for most borrowers, paying at least the interest is far cheaper.
Can I pay only the interest during a moratorium?
Many lenders allow it and it is the smart choice — it keeps your principal from growing while still easing the monthly outgo.
What happens after the moratorium ends?
Either your EMI rises to clear the larger balance in the original tenure, or the tenure extends at the same EMI. Ask which one your lender applies.
Want the theory behind the numbers? Read our moratorium guides on the Money Blog.