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Definition of 'Moratorium'

A moratorium is a temporary suspension of an obligation, usually a debt repayment. Moratoriums are often used in times of financial crisis, when borrowers are unable to meet their debt obligations. During a moratorium, borrowers are not required to make payments, and interest on the debt may be waived or reduced.

Moratoriums can be helpful for borrowers who are struggling financially, as they can provide some breathing room and help to avoid default. However, moratoriums can also have negative consequences, as they can lead to higher interest rates and make it more difficult for borrowers to get back on their feet.

There are a few different types of moratoriums. A legislative moratorium is a temporary suspension of a law or regulation. A judicial moratorium is a temporary suspension of a court order. A contractual moratorium is a temporary suspension of a contract.

Moratoriums are typically granted by a government agency, court, or lender. The terms of a moratorium will vary depending on the type of moratorium and the entity that granted it.

Moratoriums can be a helpful tool for borrowers who are struggling financially. However, it is important to understand the terms of a moratorium before agreeing to one, as they can have both positive and negative consequences.

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