1. What is Moratorium Interest?

Moratorium interest is the interest that accrues on a loan during a period when repayments are temporarily suspended. This occurs when lenders offer payment holidays or deferment periods to borrowers.

2. How Does the Calculator Work?

The calculator uses the moratorium interest formula:

Where:

• \( P \) — Principal loan amount
• \( r \) — Annual interest rate (in percentage)
• \( \text{months} \) — Duration of moratorium period

Explanation: The formula calculates simple interest for the moratorium period by prorating the annual interest rate to the number of months in the moratorium.

3. Importance of Moratorium Interest Calculation

Details: Understanding moratorium interest helps borrowers anticipate the additional cost of payment holidays and make informed decisions about loan deferment options.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate in percentage, and moratorium period in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is moratorium interest compounded?
A: Typically no, moratorium interest is usually calculated as simple interest, but check with your lender as terms may vary.

Q2: Does this apply to all loan types?
A: Moratorium terms differ by loan type and lender. Common for education loans, mortgages, and business loans during financial hardships.

Q3: Will moratorium affect my credit score?
A: If properly agreed with the lender, it shouldn't affect your score, but unauthorized missed payments will.

Q4: Can I avoid moratorium interest?
A: Some lenders may offer true payment holidays (no interest accrual), but this is less common and usually for shorter periods.

Q5: How is moratorium interest repaid?
A: It may be added to the principal (capitalized) or paid separately after the moratorium ends, depending on loan terms.