The effect of EMI moratorium is still something many borrowers think about even today. The moratorium was offered during difficult times, especially when people could not pay EMIs due to job loss or low income. It was a relief. But many still wonder, “Will this affect my score many years later?”
Let’s understand this in a simple way.
What Is EMI Moratorium?
A moratorium signifies a break from EMI payments. Banks let customers defer EMI payments for several months.
During that time,
- No payments were due
- No penalties were imposed
- The loan was just frozen
However, interest kept building up. Ultimately, this interest was added upon into the principal loan.
What Prompted the Banks To Provide Moratorium?
Banks gave a moratorium because,
- The economic downturn impacted people’s earnings
- Inability to make EMI payments was widespread
- Stable incomes were assumed in the approval of loans earlier
- It was a measure to avoid defaults
During the moratorium, banks did not classify borrowers as defaulters. Thus, even if you stopped payment, your record would remain secure.
What Was The Credit Score Situation During the Moratorium?
During the moratorium period,
- No drop in credit score
- Banks classified accounts as “under moratorium”
- No late payments were reported
This implies that your credit history remained clean. However, the situation was not that there were no after-effects.
The Real Effect After Moratorium Ended
This was the phase when the EMI moratorium started to reveal its effects.
After the moratorium was over,
The EMI was increased for many customers
OR
The loan duration was increased
OR
The overall amount to be paid became larger
The increased load led some individuals to face difficulties again. Others even postponed payments subsequently.
Delays were then indicated to be caused by banks. That was when the credit score fell. Thus, it was not the moratorium period itself that led to a decrease in the score. It was the consequences that followed the moratorium period.
How Can EMI Break Affect Score Years Later?
There are three common reasons,
1. Increased EMI Amount
When the moratorium interest got piled up:
The monthly instalment turned out to be higher
or
The period of the loan became longer.
If, in the end, one could not afford to pay, then his/her credit score would be negatively influenced.
2. Accumulated Interest
The general public is of the opinion that during the moratorium period, the whole process was put on hold.
That is wrong.
The interest was not paused
It was going on as usual.
Thus, the loan amount gained over the period.
3. New Loans After the Moratorium
Some clients took out new loans post-moratorium. The banks went through the previous documentation.
They saw,
- The amount of debt had increased
- The period had extended
- There was more burden from EMI
Thus, in some instances, there are fewer chances of loan approval.
Did Every Borrower Go Through Score Drops?
No. Only the ones who,
- Paid late AFTER the moratorium OR
- Missed EMIs later OR
- Closed their loans with delays,
suffered a credit score hit. If you properly resumed EMIs, your score remained fine.
Real-Life Example
Mr A took a pause during the moratorium period. After that, his EMI was ₹12,000. He made the payments regularly. His score was stable.
Mr B took the moratorium. Interest was added. EMI went up to ₹15,000. He later did not make an EMI payment. The score went down.
So the effect of EMI moratorium is actually indirect.
How Do Banks Interpret Moratorium in Credit Reports?
The banks are aware of,
- The timing of the moratorium
- The duration
- The regularity of the EMIs afterwards
The banks do not penalise the borrower by lowering his/her score for utilising the moratorium. The score is lowered on the basis of payments made afterwards.
What Action Should Borrowers Take in This Situation?
If the moratorium caused a higher burden, follow these steps,
EMIs must be paid on time
Set automatic payments through auto-debit.
Avoid Applying for Multiple Loans
Simultaneous loan applications will lower the score.
Limit Credit Card Usage
Keep credit card usage below the 30% limit.
Close Small Loans
Closed loans improve credit profile.
Increase Credit Limit
The ratio of credit usage is reduced.
How Olyv Helps Borrowers Today
Olyv helps in monitoring the repayment records of individuals through easy score tracking and notifications. A lot of people had a hard time understanding the situation after the moratorium, but Olyv, on the other hand, sends them reminders so that no EMIs will be missed.
Olyv also takes the borrowers through the process when they become eligible for lower interest rates according to their good repayment behaviour.
Signs That EMI Break Is Still Affecting Score
The following are the indications that are frequently observed,
- Score moves slowly, even after timely payments
- The bank gives an offer of higher rates of interest
- Approval for a loan takes a longer time
- The credit report mentions delayed payments after the moratorium
If your case fits one of the above, then it is time to check your report. Look for the mention of delays. Raise a dispute if it’s incorrect.
How to Repair Credit After Moratorium
Use this easy checklist,
- Make regular payments for active EMIs
- Don’t take new loans immediately
- Pay more than the minimum on your credit card
- Have a stable job or income
- Keep your bank account active
- Check your score monthly
Monitoring allows for early detection of changes.
Common Myths About Moratorium
- Myth 1 – A Moratorium leads to a reduction in credit score.
- Truth – No, it is the repayment after the moratorium that matters.
- Myth 2 – The Bank forgives interest.
- Truth – Later on, interest is added.
- Myth 3 – EMI break is unnoticed.
- Truth – Banks know but do not view it negatively.
- Myth 4 – Loan price drops.
- Truth – A Loan usually becomes costlier.
Long-term View
The effect of EMI moratorium does not last forever.
The credit system operates this way,
- Good payments increase the score
- Bad payments lower the score
So if you had good conduct after the moratorium,
- Score improves
- Banks are quicker to approve loans
A credit score is based on,
- 12 to 24 months of behaviour. Not just moratorium months.
Conclusion
The moratorium itself did not damage scores. The effect of EMI moratorium occurred only when payments became difficult afterwards. Increased EMI amounts and accumulated interest caused delays for some borrowers. If EMI payments continued smoothly, the credit score stayed positive.
Today, you can still fix any drop by paying EMIs consistently, reducing credit usage, and tracking your report monthly. A strong repayment track after the moratorium matters more than the pause taken earlier.
