EMI Moratorium Calculator with examples (Free Download)

Use this free EMI Moratorium calculator to understand how much extra interest you will have to pay if you opt for the three-month EMI holiday offered by your bank

Image of domino blocks with one tilted to represent the EMI moratorium calculator presented in this article for decision making

Published: April 2, 2020 at 7:24 am

Last Updated on

Use this free EMI Moratorium calculator to understand how much you would lose (pay extra interest) if you opt for the three month EMI holiday offered by your bank under the directions of RBI.

We have already discussed why you should not opt for RBI’s EMI moratorium & defer loans by 3 months. Here is how EMI holiday works. First, let us understand how loan amortization works. That is, how a loan gets paid off. Those interested in a flexible loan amortization spreadsheet can get one here: Excel Home Loan Amortization Schedule Template. The EMI Moratorium Calculator in this article is derived from this template.

Once the EMI for a loan is calculated – just like an MF SIP: Understanding Loan EMI Calculation as a Monthly SIP Investment! – it has two components: the interest which is equal to outstanding balance x (loan interest/12) and the rest of the EMI is the principal.

After each EMI is paid, the principal component is deducted from the loan outstanding.  While the EMI is constant each month, the principal and interest components change as shown below.

Example of Loan amortization schedule
Example of Loan amortization schedule

These are the associated numbers. Initially, the EMI is dominated by the interest

Loan amortization table with some typical numbers
Loan amortization table with some typical numbers

How EMI Moratorium Works

Suppose we avail the EMI moratorium offered by the bank for the 7th, 8th and 9th months. That is the EMI for those months is set to zero. However, the interest will accrue.

How EMI Amortization works
How EMI Amortization works

For the 7th month,  the interest on the outstanding balance of Rs. 9,68,407 in the 6th month is Rs. 7263. This gets added to the outstanding balance in the 7th month and becomes part of the principal.

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For the 8th month, the outstanding balance is Rs. 9,68,407 + Rs. 7263 = Rs. 9,75,670. The interest on this amount is Rs. 7318 which gets added to the balance.

For the 9th month, the outstanding balance is Rs. 9,75,670 + Rs. 7318 = Rs. 982988. The interest on this amount is Rs. 7372 which gets added to the balance.

Now in the 10th month, the EMI resumes. You could ask the bank to increase the EMI and the loan would end as planned or you could pay the same EMI and the loan would get extended. The calculator only considers the latter possibility: same EMI, longer loan tenure. For the numbers shown above, the loan would get extended by 8 months and the excess interest to be paid = 4.14 times the EMI!

This is why banks would happily offer the moratorium or even set it by default! They earn more! This is why you should never accept the moratorium! If your cash flow situation is so bad that you cannot pay the next three EMIs then you may not pay EMIs after the EMI holiday as well!  The spirit of the EMI moratorium is lost. Never opt for it!

EMI Moratorium Examples

Example 1

  • Loan amount: 10 lakhs
  • Loan Tenure: 10 Years
  • Interest rate: 9%
  • The month when moratorium starts: 7
  • Excess interest to be paid if you avail moratorium: Rs. 52,457
  • The loan will be extended by (months): 8
  • Excess interest divided by EMI: 4.14

Example 2

  • Loan amount: 10 lakhs
  • Loan Tenure: 10 Years
  • Interest rate: 9%
  • The month when moratorium starts: 45
  • Excess interest to be paid if you avail moratorium: Rs. 29,650
  • The loan will be extended by (months): 6
  • Excess interest divided by EMI: 2.34
  • Since the EMI has lesser interest component in the 45th month than the 7th month, the loss is lower.

Example 3

  • Loan amount: 10 lakhs
  • Loan Tenure: 5 Years
  • Interest rate: 12%
  • The month when moratorium starts: 10
  • Excess interest to be paid if you avail moratorium: Rs. 45,239 (4.5% of the loan amount)
  • The loan will be extended by (months): 6
  • Excess interest divided by EMI: 2.03

Example 4

  • Loan amount: 2 lakhs
  • Loan Tenure: 2 Years
  • Interest rate: 25%
  • The month when moratorium starts: 2
  • Excess interest to be paid if you avail moratorium: Rs. 20,452 (10.23% of the loan amount)
  • The loan will be extended by (months): 5
  • Excess interest divided by EMI: 2.03

EMI Moratorium Calculator

This is the screenshot of the calculator with input cells in green.

screenshot of the EMI moratorium calculator
screenshot of the EMI moratorium calculator

Download version 2 of the EMI Moratorium calculator (updated 3rd April 2020)

(This is version 1  here you can only set 3 EMI holidays)

References

  1. Circular from SBI
  2. Circular from ICICI Bank
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6 Comments

  1. Thanks for the EMI Moratorium Calculator which would be extremely useful in calculating the impact of Moratorium on interest payments. I have one suggestion to implement. Since most of us has already paid EMI for March 2020, Moratorium can be used only for 2 months. If there is a provision in excel sheet for calculating the impact of Moratorium for 2 months, it would be helpful. Currently, if I enter the month of moratorium, excel automatically makes three months EMI to Zero. Please share your thoughts on this.

  2. I was taken home loan 22 lakhs but now 11 lakhs give builder and 11 lakhs pending b’cause under construction site .. i was pay PRE EMI for six month .. pre EMI is only interest companant . So I was pay first pre EMI 7 thousand something previous month . Please suggest 3 month moratorium affordable for me…

  3. This is ridiculous. On my home loan of 35 lakh for 240 months for which I am paying 29011 as monthly EMI. If I opt for EMI Moratorium then additional interest bank will charge would be around 4 lakh 40 thousands. This is killing thing. Thank god I have read your article and utilized your calculator. I was intentionally planning to avail this benefit to save some money for emergency, but now I would not because banks will be exploiting us out of this crisis situation.

  4. Is there really no option offered by banks to keep the duration intact and increase the EMI amount. if it so. can you provide the calculations to keep the duration same and change the EMI amount?

Comments are closed.