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

Published: April 2, 2020 at 7:24 am

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.

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
Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps