EMI Moratorium: The Right Choice for You Amidst Financial Struggles

During times of financial hardship, especially exacerbated by events such as the COVID-19 pandemic, borrowers often encounter cash flow issues that prevent them from making consistent loan payments. In such scenarios, choosing an EMI moratorium can provide much-needed relief. An EMI moratorium allows borrowers to delay payments on outstanding term loans or credit card dues for a specified period, typically from March 1 to May 31, 2020. However, like any financial decision, it comes with its own set of implications and considerations.

Is EMI Moratorium Right for You?

For those who face significant cash flow challenges due to the COVID-19 pandemic, an EMI moratorium is indeed a viable and recommended option. This measure provides a period during which delayed payments are not counted as defaults, offering temporary financial relief. However, it is crucial to understand that opting for an EMI moratorium for a three-month period can have lasting financial implications, including the accrual of additional interest on deferred EMIs.

Below are the key points to consider before deciding whether an EMI moratorium is the right choice for you:

Pros of EMI Moratorium

Financial Relief: Borrowers are not penalized as defaulters during the moratorium period. Avoiding Credit Damage: Maintaining a good credit score during financial hardships is crucial, and an EMI moratorium helps in avoiding credit damage.

Cons of EMI Moratorium

Additional Interest: All deferred EMIs accumulate additional interest, which will be added to the principal amount. Loantenure Extension: Depending on the loan, the moratorium can result in an extended loan tenure or owing a larger principal amount at the end of the moratorium period.

Advising Based on Your Situation

Based on your personal financial situation, you should carefully weigh the pros and cons of an EMI moratorium to make an informed decision. If your cash flow permitting, regular EMIs are recommended, as paying extra interest for a moratorium period can become costly in the long run. Additionally, utilizing funds from other sources to manage the shortfall is a better strategy than extending your loan tenure.

Key Considerations

If your monthly salaries are stable, it is advisable to pay regular EMIs to avoid additional costs and maintain a good credit score. If your cash flow is significantly impacted and you cannot manage to pay regular EMIs, then an EMI moratorium can be a sensible choice.

Final Thoughts

While an EMI moratorium can provide much-needed relief during financial hardships, it is essential to understand its implications. Regular loan payment management ensures financial stability and avoids the long-term costs associated with moratoriums. Always consider the flexibility and potential financial improvements of your current situation before opting for any financial relief measures.