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The short answer
A moratorium is a period at the start of a loan, or granted later, during which you make no principal repayments and sometimes no payments at all. On most loans interest still accrues during the moratorium and is either collected monthly or added to the balance, so the later instalments and the total cost are higher than they look. Ask the lender which method your loan uses.
Moratoriums are common on business, agricultural, housing and other scheme loans in Nigeria, and lenders also grant them to borrowers in difficulty. The word suggests a pause, and the first months certainly feel lighter. The question that decides what you end up paying is simple: what happens to interest while you are not repaying?
What a moratorium covers
Offer letters describe moratoriums in different ways. These are the forms you are most likely to see:
- Principal moratorium
- No principal is repaid, but interest is paid each month as normal.
- Full moratorium, interest capitalised
- Nothing is paid; interest that accrues is added to the balance and repaid later with interest on it.
- Full moratorium, interest deferred
- Nothing is paid; accrued interest is collected later as a separate lump or spread over the instalments.
- Interest-free moratorium
- No interest accrues during the break. This is the least common form and should be stated in writing.
A moratorium can also either extend the total life of the loan or sit inside it. If a 36-month loan includes a six-month moratorium, you repay over 30 months, not 36, and each instalment is larger.
Worked example: six months' moratorium on ₦1.2 million
Example figures only. A ₦1,200,000 loan at 9% a year (0.75% a month), with a six-month moratorium followed by equal monthly instalments. Interest for the six months, counted simply, is ₦1,200,000 × 9% × 6 ÷ 12 = ₦54,000.
| How the moratorium works | Paid during the 6 months | Monthly instalment after | Total repaid |
|---|---|---|---|
| Interest paid monthly, 36 instalments after | ₦54,000 (₦9,000 a month) | ₦38,159.68 | ₦1,427,748.45 |
| Interest capitalised, 36 instalments after | ₦0 | ₦39,876.86 | ₦1,435,567.13 |
| Interest capitalised, moratorium inside a 36-month tenor (30 instalments) | ₦0 | ₦46,834.59 | ₦1,405,037.81 |
| Interest-free moratorium, 36 instalments after | ₦0 | ₦38,159.68 | ₦1,373,748.45 |
Instalments use the standard equal-instalment formula on a reducing balance. Three points stand out:
- Capitalising ₦54,000 of interest costs ₦7,818.68 more in total than paying it monthly (₦1,435,567.13 against ₦1,427,748.45), because the capitalised interest itself attracts interest.
- Squeezing repayment into 30 months raises each instalment by about ₦7,000 against the 36-month version, but the total is lower because the money is borrowed for less time.
- Only a written interest-free moratorium leaves the cost of the loan where it started. If monthly compounding is used during the break, the capitalised balance is ₦1,255,022.68 rather than ₦1,254,000, slightly higher again.
Why lenders structure it this way
A moratorium matches repayments to when the money starts working: a farm before harvest, a business before its first sales, a student before graduation. The lender is still funding the loan during the break, so in most cases it still charges for the money. Scheme loans with subsidised rates can differ, and their rules are set by the scheme's own documents, which is why you should read the offer letter rather than rely on a scheme's headline.
Asking for a moratorium on an existing loan
If you are struggling, a lender may agree to a moratorium as part of a restructuring. Expect it to come with costs. GTBank's QuickCredit terms, for example, state that a facility restructuring fee of 0.5% of the outstanding amount is charged, as published on its page in October 2026. For digital lenders, the FCCPC's 2025 regulations say changes to a consumer lending contract should only be made where the contract expressly provides for them, and lenders should notify consumers of circumstances that may affect their terms. Our guide on requesting an interest waiver or moratorium covers the letter itself.
Moratorium, payment holiday and interest-only: not the same thing
Lenders and borrowers often use these words interchangeably, but they describe different arrangements, and the difference shows up in the schedule.
- Moratorium usually refers to a break built into the loan from the start, or agreed in a restructuring, and normally covers principal.
- Payment holiday is a looser term for skipping one or more instalments later in the loan. Interest on the skipped months is normally added to the balance or to the remaining instalments.
- Interest-only period is a principal moratorium by another name: you pay interest monthly and the balance stays flat until principal repayments begin.
Whatever the label, the test is the same: ask for the balance on the last day of the break. If it is higher than the amount you borrowed, interest has been capitalised. If it equals the amount borrowed and you paid nothing, the break was interest-free or the interest is being held as a separate amount to collect later.
What to check first
- Does interest accrue during the moratorium? Ask for a yes or no in writing.
- If it accrues, is it paid monthly, capitalised, or deferred as a lump?
- Does the moratorium extend the tenor, or sit inside it?
- Ask for the full repayment schedule, from the first month to the last, showing the balance each month. Our amortisation schedule guide shows how to read one.
- Compare total repaid, not only the first instalment after the break.
Where Pryme fits
Loans on Spaces, lent by Solid Allianze Microfinance Bank, show the amount, cost and repayment date in full in the agreement before you accept. If you want to know where each charge appears, see what a Loan on Spaces costs and how Loans on Spaces work.
Questions people ask
Does interest stop during a loan moratorium?
Usually not. On most loans interest keeps accruing and is either paid monthly or added to the balance. Only a moratorium stated as interest-free stops interest.
What does a 6-month moratorium mean on a loan?
You make no principal repayments, and sometimes no payments at all, for the first six months. Repayment of the balance, plus any interest built up, starts afterwards.
Is moratorium interest added to my loan balance?
If the offer letter says interest is capitalised, yes. You then pay interest on that interest, which raises the total cost.
Can I ask my bank for a moratorium on my loan?
You can ask. The bank may agree as part of a restructuring, often with a fee and revised schedule. Get the new terms and schedule in writing before agreeing.
Sources
- GTBank: QuickCredit product page and terms · accessed Oct 2026
- FCCPC: Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025 · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.