Moratorium Period - Home Loan, Education Loan & Project Finance for Business | Hindi - YouTube

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Namashkar, my name is Mukul and welcome to Asset Yogi

where we unlock the knowledge of finance rather than locking it

In this video, we are going to discuss about Moratorium period

The moratorium period is a very useful and popular concept

in home loans, education loans, or in project finance

Project finance means if you set any project in your business like a factory, plant

You get project finance for it

In these types of loans, you get a facility of moratorium period

In that, you get an initial holiday period till the project is being set up

or if you are going on with studies and you don't have money for paying the EMI

then you get a holiday period in which you don't have to pay EMI

So how does this concept works, how do you have to pay the interest in that period, How the calculation is done?

What are the pros and cons of the moratorium period?

How it can be beneficial for you?

We'll see all these in detail

So stay tuned with this video till the end so that you understand the concept and calculation properly

Let's switch to the blackboard

Let's understand the moratorium period through an example

Let's take an example of education loan

This is the timeline of the loan

Let's say you are pursuing a degree of 2 years. I am considering this as 0 date

You took a loan when you started with your degree

And let's say the degree is for 2 years duration

In education loan, your EMI starts

after either 1 year of course completion or 6 months after the job

whatever will happen first, then your EMI will start

That means if you are placed just after the completion of your degree

then within 6 months, your EMI will start

So let's say you completed the degree and you have a job immediately

After that, you got a grace period of 6 more months and 2.5 years are completed

and after this, your repayment will start so you will start repayment from here onwards

So this period of 2.5 years in which 2 years are for degree completion and 6 months of extra grace period

This time period is called the moratorium period

This period that you can see, let me write here in short, this is moratorium period

Where you don't have to pay any EMI

In this, there are 2 options

Either you can only pay the interest in the moratorium period

or you can opt for neither principal nor interest

So in education loans, people don't even pay the interest

So your full EMI will start from here

So let's see how the calculation will be done through an example

Let's say you borrowed a loan of Rs 5 lakhs

at the rate of 10% per annum

Let's say this is the interest rate of your education loan

So you have 2 options here

1. When you're neither paying the interest nor the principal for the first 2.5 years

So how your calculation will be done in this case

Let's say in the first year, the interest according to 10% on Rs 5 lakhs is Rs 50,000

If we'll calculate for 2 years, it will be Rs 1 lakhs and for 2.5 years, it will be Rs 1.25 lakhs

So this was the interest from 0 to 2.5 years

And now the EMI will be calculated after 2.5 years

So let's say the loan will be there for 5 more years so let me write 7.5 years

So if we'll calculate the EMI for 5 years, the principal amount will be

Rs 6.25 lakhs, right!

Understand this carefully

Here, in the principal amount of Rs 5 lakhs

the interest portion of Rs 1.25 lakhs which you didn't pay in 2.5 years is added

So the total principal is Rs 6.25 lakhs

So now the EMI will be calculated for Rs 6.25 lakhs for 5 years at the rate of 10%

So your EMI will be Rs 13,279

So in this case, you'll pay EMI on Rs 6.25 lakhs

2. Option is only interest during the moratorium period

Let's say you paid the interest of Rs 1.25 lakhs simultaneously

So in this case, your principal will be considered Rs 5 lakhs

because you paid the interest simultaneously

Now your EMI will be calculated on Rs 5 lakhs

Let's say the EMI for 5 years at the rate of 10%

will be Rs 10,624 in this case

So if you think you can pay the interest rate in the moratorium period, then you should definitely do it

And if you think this will be a burden on you and you cant pay

especially in education loans, because students are not earning

so paying interest rates is difficult for them

In this case, students generally opt to pay after the job placement

And let's say you remain unplaced immediately after the degree

So the bank will wait a maximum of 1 year

and you have to repay after 3 years of loan disbursement whether you are placed or not

Because banks will take the loan back and if you're are not able to repay

In that case, your credit score will get affected

and bad credit score means you'll face problems in getting loans or credit cards in future

So if you don't want your credit score bad, start repaying your loan as soon as possible

Try to get a job as soon as possible and if you don't get it, start repaying by taking some amount from your personal sources or family

So this was about education loan

Moratorium period works in the same way in the home loan as it works in education loan

In the home loan, people generally take a moratorium period for under-construction property

In under-construction property, you get a moratorium period at the time of construction for 2.5-3 years

But in this case, the bank insist to pay the interest simultaneously

So if the moratorium period is for 3 years

So in those 3 years, you have to pay the interest which is called pre EMI interest

And after 3 years, full EMI starts

Generally, home loans are lengthy tenure loans

These are generally for 15, 20 years so you get a moratorium period of 2.5-3 years easily

And if you buy ready to move property, you get a moratorium period in that case also for 3-6 months

But you should only opt for it if you cannot pay the EMI or interest

or you face any financial difficulty

But in the case of under-construction property, it is quite popular

Pre EMI interest

If you want to know more about it in detail, I made a detailed video on it

So you can watch that video

So this was about the home loan and the concept works exactly the same. Both the options are available

Generally, the No Interest option is difficult and it is for a very less time period in the case of a home loan

But in the moratorium period, the Interest paying option is easily available

Now let's talk about project finance

Project finance means if you have a business, if you want to set up a factory, a plant, or a project

Then you get a loan for it on the basis of a project

and that is called project finance

The earning potential of these projects is 20-50 years

So you get a loan for 10-15 or sometimes even for 20 years

So in such a case, you get a moratorium period of 3-5 years

You have both the options in this case also

Either you can pay the interest in the moratorium period

or you can take an EMI holiday

In that, neither you have to pay the principal nor the interest as in this option

So both these options are available in the case of project finance and even if you don't pay any interest

In that case, interest is capitalised as we saw in this case where interest is added in the principal

and after the moratorium period of 3 years, the full EMI get started

and the interest will be added in the principal

So the concept is exactly the same whether it is an education loan, home loan, or project finance

Basically, there are 2 options in the moratorium period

1. Neither pay principal nor interest

2. Pay only interest. So the calculation is done accordingly

One more thing, if you pay the interest in the moratorium period, then you get a concession on the interest rate

You get a concession rate of 0.5-1%

So let's say if the interest rate on the interest rate was 10% but if you pay the interest in the moratorium period

So maybe, you get it at 9%

So these concessions are sometimes allowed and you can negotiate with your bank

And this interest is very beneficial for you

and if you can pay the interest in the moratorium period, you should definitely do it

So I think the moratorium period concept is now clear to you after watching this video

and I hope you can now decide in future whether you should opt for a moratorium period or not

If you liked this video then do like it and share it with your friends and family members

So that they can also get the benefit of this

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Till then keep learning, keep earning, and stay happy as always.