When you're financially stressed and unable to repay your EMIs, two options often come up — Loan Moratorium and Loan Restructuring.
But they’re not the same, and choosing the wrong one could damage your credit score or lead to higher interest costs.
Let’s break them down in simple terms so you can make the right choice.
What is a Loan Moratorium?
A moratorium is a temporary pause on loan repayment. You don’t have to pay EMIs for a specific period (e.g., 3 or 6 months).
Key Features:
No EMIs during the moratorium period
Interest continues to accrue
Tenure may increase post-moratorium
Credit score generally not affected if moratorium is officially granted
Best for:
Short-term financial issues like job loss, temporary medical crisis, etc.
What is Loan Restructuring?
Loan restructuring is a more permanent change to your loan terms. This may include:
Extended tenure
Lower EMI
Changed repayment structure
Temporary or partial interest waiver (rare)
Key Features:
Reworking of the original loan agreement
May involve additional documentation and lender approval
Credit score may take a hit, since it's seen as an indication of financial stress
Once restructured, the loan is flagged in your credit report
Best for:
Long-term or deeper financial distress (business failure, income loss, large medical bills)
Key Differences: At a Glance
| Feature | Loan Moratorium | Loan Restructuring |
|---|---|---|
| EMI Pause | Yes (temporarily) | Not necessarily paused |
| Credit Score Impact | Low to None (if official) | Moderate to High |
| Loan Agreement Change | No | Yes (permanent changes) |
| Processing Time | Quick | Takes longer |
| Suitable For | Temporary cash flow issues | Long-term repayment difficulty |
| Interest Accrual | Yes | May reduce or spread over time |
Which One Should You Choose?
✅ Choose Loan Moratorium if:
Your financial problem is temporary (1–6 months)
You can resume EMI payment soon
You want to avoid credit score impact
✅ Choose Loan Restructuring if:
You’ve lost income or your business is failing
You need to permanently lower EMI
You’re okay with the credit report reflecting the restructuring
Pros & Cons
Loan Moratorium Pros:
Instant relief
Keeps loan active
No immediate penalty
Loan Moratorium Cons:
Increased interest burden
Longer repayment period
Loan Restructuring Pros:
EMI becomes manageable
Avoids default or legal action
Suitable for long-term recovery
Loan Restructuring Cons:
Impacts credit report
May involve fees or stricter terms
FAQs
Q1: Will my CIBIL score be affected if I opt for a moratorium?
If granted officially and you resume EMIs post-moratorium, it typically won't hurt your score.
Q2: Is loan restructuring considered a default?
No, but it is marked on your credit report as a restructured loan, which future lenders may view cautiously.
Q3: Can I restructure a loan after already taking a moratorium?
Yes, if your financial condition worsens, you can request restructuring after a moratorium ends — but it’s subject to lender approval.
Published on : 2nd August
Published by : SMITA
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