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A moratorium is a banking concept primarily related to loans. It means temporary suspension or postponement of equated monthly instalments (EMIs) (usually by few months) without any additional expense for the borrower of the loan. Such an option is undertaken by lenders to help borrowers to plan their monthly finances and EMIs in a timely manner.

Car loan moratorium is with respect to loans taken for car wherein the borrower gets the option to postpone his/her EMIs by a few months. Reserve Bank of India (RBI) had given a six-month moratorium on home, car, education and personal loans on account of the ongoing Covid-19 crisis during 2020. Banks were asked to pass on the moratorium period to borrowers to ease their debt burden due to income being hit by the crisis.

What is a car loan moratorium?

Car loan moratorium refers to moratorium offered to borrowers on loan taken on their car. Key features of car loan moratorium are:

  • Extra liquidity for borrowers.
  • Moratorium eases the financial burden of borrowers allowing them to meet immediate financial needs in the moratorium period.
  • The car loan moratorium allows you to postpone paying your car loan EMIs by a few months, like during the Covid-19 pandemic.
  • A car loan moratorium may be an added benefit that comes with a car loan. 
  • Normally, car loan tenure is up to a maximum of 7 years, so banks may give a car loan moratorium option during the initial loan stages.
  • Having a car loan moratorium as part of the broader car loan is an attractive offer for borrowers.
  • A car loan moratorium is not the same as a waiver.
  • Interest continues to accrue on the outstanding portion of the loan amount during the moratorium period.
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