Moratorium

Moratorium

A moratorium is a temporary suspension of an activity or a law until future events warrant lifting the suspension or related issues have been resolved. This is an emergency act of allowing an extension of time by the government of a country to repay loans. It may be imposed by a government or by a business. For example, a business that has exceeded its budget might place a moratorium on new hiring until the start of its next fiscal year.

In legal proceedings, a moratorium can be imposed on an activity such as a debt collection process. Under exceptional circumstances, the government takes this step, which deprives all creditors of the right of realizing their debts, for the time being, this is specially done in the case of a government bank, which during an emergency suspends payment. It is a legally authorized period to delay payment of money due or the performance of some other legal obligation, as in an emergency. In bankruptcy law, it is a legally binding hiatus in the right to collect debts from an individual. This time-out period protects the debtor while a plan for recovery is agreed upon and put in place.

A moratorium period is a time during the loan term when the borrower is not required to make any repayment. It is a legally authorized period of delay in the performance of a legal obligation or the payment of a debt. Insurance companies often issue moratoriums on new policies for properties in specific areas during the course of a natural disaster. Such moratoriums help mitigate losses when the probability of filed claims is abnormally high.

A moratorium period is a period during a loan term when the borrower is not obligated to make a payment. During the moratorium period, on an education loan, the bank will calculate interest on your loan on a simple interest basis. For example – Educational loans are repaid after student graduates and get a job. The time between when the student got the loan to pay his school tuition and fees and when he graduated and got a job and had to start making fixed monthly loan payments is a moratorium period. It is a waiting period before the borrower starts making fixed monthly payments. It is a grace period of sorts after the loan amount has been disbursed to the borrower. However, interest accrues during the moratorium period and the borrower must pay it.