Repayment of Principal in Moratorium Period

POSTED BY dinkar ON April 19, 2011 10:03 pm ONE COMMENT

Hi, My name is Dinkar and I had applied for a home loan in SBI for 34 lakhs.  They have processed my Loan under the SBI YUVA home loan policy that includes a MANDATORY moratorium period for 3 years in which Ist year there is no repayment and after that there is a payment of the interest for next two years leading to normal EMI from 3rd year. However, I am purchasing a ready to occupy property and would like to start my EMI directly. After talking to the Bank executives (including manager and cheif manager) I got to know that it is a mandatory period and I cannot start my EMI directly. Therefore, my question is that during that period will I be able to pay my Principal amount ( like lumsum amount which I save) apart from the Pre-emi interest so that I can decrease my interest later.  

Below I am Quoting the statement in the arrangement letter provided by the bank

             \”Moratorium period is the period starting from the date of first disbustment, during which repayment of the principal and/or interest may not be stipulated. Please note that interest is applied to the account on the basis of the balance outstanding in the account, during the moratorium period\”


In the above statement I am unable to understand the two conflicting sentences as one says that you cannot pay the principal or interest and the other says that the interest will be calculated on the outstanding balance in the account.

I am already fed up of talking to different people here and I am unable to get a proper answer. I would greatly appreciate if some one can help me out on this.




One reply on this article “Repayment of Principal in Moratorium Period”

  1. Dear Dinkar, The moratorium period is restricting the payment of principal either in the form of EMi or lump sum, for the given situation, my take ‘ll be to go for FD of the lump sum amount you are having & RD for the EMI amount or the amount meant for mly principal repayment. Once this moratorium is over, use these FDs & RDs to pay back in lump sum all the amount you are having with you meant for partial prepayment of your home loan.

    If possible keep these FDs & RDs in the name of of non earning or lower tax slab person of the family say your mother or father.



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