A more thorough explanation:

Definition: Moratory interest is a type of interest that is charged on a debt or obligation that is not paid on time. It is also known as prejudgment interest.

Example: If a person borrows money from a bank and fails to make the payments on time, the bank may charge moratory interest on the outstanding amount. This means that the borrower will have to pay an additional amount as interest on the overdue amount.

This example illustrates how moratory interest works. When a borrower fails to make timely payments, the lender may charge additional interest to compensate for the delay in receiving the payment.