TheTaxHeaven Dictionary - Know the meaning of tax


What Is a Moratorium? 

A moratorium is a pause or delay in an activity or obligation. In financial terms, it usually refers to a halt in loan repayments or other financial duties. 

During a moratorium, borrowers are temporarily excused from making loan payments. These are typically granted during financial crises, such as natural disasters, economic downturns, or pandemics. 

The goal of a moratorium is to provide temporary relief to those struggling financially. It allows borrowers to delay payments without penalties or interest charges. They are granted for a limited time and the terms vary depending on the lender and the situation. 

What is a Moratorium in loan? 

In a loan, a moratorium is a pause in loan or interest payments for a set period. During this time, the borrower isn't required to make loan payments, and no interest or penalties are accrued on the remaining loan balance. 

Loan moratoriums are generally granted to those facing unexpected financial difficulties. They are also common during pandemics or other crises. 

The purpose is to provide temporary relief to borrowers who are unable to make their loan payments. Borrowers can defer payments without negative consequences like late fees or negative credit reporting. The terms vary based on the lender and the circumstances. 

Is Moratorium interest-free? 

Whether a moratorium is interest-free depends on the lender’s specific terms. In some cases, a moratorium may be interest-free. However, in many instances, interest still accrues during the moratorium period. It's essential to review all terms and conditions to understand potential interest and any additional fees.