Moratorium on education loan comes at a cost
1 min read . Updated: 12 Jul 2020, 10:02 PM ISTA moratorium is a period during which the borrower doesn’t need to repay the loan
A moratorium is a period during which the borrower doesn’t need to repay the loan. Typically, the repayment for a loan starts soon after a borrower takes it. But some loans allow the borrower to not start repaying in the initial few months.
Moratorium is common in education loans. Lenders allow students to start repaying once they finish their courses and start earning. So a borrower doesn’t need to repay the loan up to six months after the course is over or until she gets a job, whichever is earlier. Some banks give a moratorium of up to one year.
But the benefit comes at a cost. Banks charge interest for the moratorium period, which is added to the principal. In education loan, a lender usually calculates interest on loan on simple interest basis.
Some banks also offer a concessional interest rate if the borrower is willing to pay only the interest portion of the loan during the moratorium period.
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