what is moratorium in loan

A moratorium period is a temporary halt of loan repayment, during which the borrower is not obligated to make payments. It is similar to forbearance or deferment and is usually granted by the lender to the borrower for a specific period of time and for a specific reason, often due to financial hardship. A moratorium period can be longer than a grace period because financial hardship takes longer to recover from and the period is agreed upon between the lender and borrower. During the moratorium period, interest on the loan generally accrues, resulting in a higher total loan amount payable. The terms and conditions for the moratorium period can vary across lenders. Examples of a moratorium period include an individual who takes out a loan and has a monthly payment of $300. If the individual can no longer pay this $300 due to financial hardship, they would contact their bank and ask for a moratorium on the loan payments.