A moratorium is a legal delay of an action or activity. It could be an agreement between a borrower and lender to stop previously accepted payments, or perhaps a government order to suspend a certain activity. The definition of moratorium is often used when referring to debt relief or a pause in an agreement.
In times of crisis, governments may impose a moratorium on certain activities such as evictions or foreclosures. This allows borrowers to temporarily avoid paying late fees and other costs associated with delinquency. This gives them some breathing room to focus on more pressing matters. It is also used in various forms when credit card companies offer their customers a way to temporarily suspend payments.
For businesses, a moratorium could also mean a delay in filing taxes, or ceasing to pay certain fees. It can also be a way for companies to renegotiate or restructure their debt. This can allow businesses to remain in operations and maintain cash flow while they work through difficult times.
Moratoriums can be beneficial for both borrowers and lenders in times of crisis. While they may be granted either by agreement or by a governing body, moratoriums are generally seen as a way of providing a legal grace period for those in need.