Moratorium Period in Education Loan 2026 Meaning, Interest, Tips
What is moratorium in education loan? Interest capitalizes and increases principal. For ₹10L loan — not paying during 3.5 year moratorium adds ₹3.91L to your debt! How to avoid this.
What is Moratorium Period in Education Loan?
Moratorium period = the "payment holiday" — you don't pay EMI during course + 1 year (or 6 months after getting job). During this time, loan is outstanding but no payment is required. Banks call this "repayment holiday."
Warning: Interest ACCUMULATES during moratorium — this is the most misunderstood fact!
Banks compound interest and add it to principal. When repayment starts, your principal is HIGHER than original loan. This is called "capitalization of interest."
Capitalization Impact — Real Numbers
| Original Loan | Rate | Moratorium | Principal at Repayment Start | Extra Added |
|---|---|---|---|---|
| ₹10,00,000 | 9.5% | 3.5 years | ₹13,91,677 | ₹3,91,677 extra! |
| ₹20,00,000 | 10.5% | 3.5 years | ₹28,39,854 | ₹8,39,854 extra! |
| ₹50,00,000 | 11% | 3 years | ₹68,53,560 | ₹18,53,560 extra! |
Should You Pay Interest During Moratorium?
YES — Pay at least the interest during moratorium if you can!
For ₹10L @ 9.5%: Monthly interest = ₹7,917. Paying this during 3.5 years of moratorium saves ₹3,91,677 in total repayment. Even partial interest payment helps.
| Strategy | Monthly Payment | Principal at Start | Total Interest |
|---|---|---|---|
| Full moratorium | ₹0 | ₹13,91,677 | Much higher |
| Pay interest only | ₹7,917 | ₹10,00,000 | Saves ₹3.91L |
| Pay interest + partial principal | ₹12,000+ | Less than ₹10L | Maximum savings |
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