Car EMI Moratorium Explained: Frequently Asked Questions Answered

We answer all your questions on the 3-month moratorium and its impact on your EMI

What is meant by moratorium? Is it compulsory or optional?

A ‘moratorium’ can be considered as permission to postpone payment of an EMI. However, this is not to be confused with an EMI holiday. It is not at all compulsory and you can opt for it provided your lender is offering it. If you haven't opted for the moratorium, it's assumed you will pay EMI as usual. Alternatively, if you have been offered a moratorium by default, and you wish to opt out you can do so too.

Which all banks/lenders are offering a moratorium on auto loans? Is my bank listed?

Most banks have offered a moratorium. If you have a running loan, you would have received a notification from the lender by now. 

Almost all auto financiers have decided to offer a moratorium on auto loans. We’re seeing three broad approaches:

• Some banks have offered automatic moratorium to customers. That means anybody who doesn’t wish to avail it will have to specifically opt out by reaching out to their financier. Many PSU banks are using this approach.
• Some banks have offered "opt-in" moratorium to all customers. This means customers will not be covered in the moratorium by default. Those desiring the moratorium will have to opt-in for it as per specific communication and guidelines received from their financier before their EMI for April. HDFC Bank, ICICI Bank and Axis Bank are following this approach.
• Some banks have offered "opt-in" moratorium to a specific segment of customers only. This means April EMIs will be presented by default for most customers. Those who are unable to clear their presented EMIs will then be offered an opt-in feature if they so desire. AU Small Finance Bank, IDFC First Bank are some examples of this approach.

Mahindra Finance, one of the largest auto loan NBFC in India, has also decided to offer a moratorium. Some NBFCs are still deciding and announcements are expected by April 2.

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How do I opt-in/opt-out for a moratorium?

Follow the instructions in the mail/SMS. 

How much interest will be charged if I opt for a moratorium? Can you share an example?

Interest is charged based on the loan repayment schedule. Here, the pending tenure of the loan will determine the interest you are charged post the moratorium. 

Example 

• Principal: 5 lakh
• RoI: 9%
• Tenure: 3 Years
• Calculated EMI: Rs 15,889
• Accrued Interest Range: Rs 706 - Rs 10,976

The accrued interest will get added to your outstanding principal amount. This can be adjusted by either keeping the EMI the same and extending the tenure (where possible) or bumping up the EMI suitably to pay the outstanding amount within the stipulated tenure.

Will I be able to opt for a moratorium on my auto loan even with other pre-existing loans like home loan, personal loan, etc?

Yes, it’s applicable on all term loans. 

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Can I seek a moratorium for one month (April) but cancel it from May and continue my EMI? 

By discussing it with the bank, this is possible. It is not mandatory to avail full three months. 

Will seeking a moratorium impact my credit score/rating?

No, it does not impact the credit score in any way. However, failure to pay dues after June will impact your credit score. 

What happens if I have not opted for a moratorium, but do not have sufficient balance in my bank account?

This will count as a regular missed EMI. Penalties will be charged accordingly as per the terms and conditions of the loan.

Should I really opt for a moratorium? 

If you are a salaried individual and your income has not been impacted, pay the EMI as per schedule. The moratorium will lead to a bump up in EMI and/or tenure.

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