Personal Loans With Deferment Options

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ByChristopher Boston
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Reviewed byAlvin Yam, CFP
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Updated: March 20, 2024

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Taking out a personal loan is a major financial decision, binding you to a set repayment schedule over a period of time. You can use these loans for a variety of purposes, from consolidating high-interest debt to funding significant life events or emergency expenses.

Given this commitment, it's helpful to understand the flexibility your loan offers, particularly in terms of payment deferment. This option can be a lifeline during financial disruptions, like job loss or unexpected medical bills, allowing for temporary suspension of payments.

However, not all personal loans come with deferment options. Shopping around and finding one with payment flexibility ensures you're better prepared to navigate any financial uncertainties that may arise, maintaining your financial health and stability.

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What Is a Personal Loan Deferment?

A personal loan deferment allows borrowers to halt their loan repayments temporarily. This pause can last a few months based on the lender's terms and the borrower's unique situation. During financial challenges, such as unexpected job loss, significant medical expenses or other sudden financial burdens, deferment offers a crucial breathing space.

While payments are on pause, interest often continues to accrue, potentially increasing the total amount owed over the loan's lifespan. The accrued interest typically does not require payment during the deferment period. Your lender usually adds it to the remaining loan balance, and payments resume after the deferment period ends.

Interest will continue to accrue on the outstanding principal balance, including any amounts that were deferred from previous payments. Once the deferment period concludes, lenders typically provide options for handling repayment.

Some might extend the loan's duration to accommodate the missed payments, integrating the deferred amount into future installments. Alternatively, the lender may request a lump sum payment of the deferred amount at the end of the deferment period. This would mean that you would need to pay the total amount of the deferred payments all at once.

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EXPERT TIP

Deferment refers to pausing the scheduled principal and interest portions of your loan's minimum monthly payment. Depending on the lender's policies, you may still need to pay other loan-related charges or fees during deferment. — Alvin Yam, CFP®

Benefits and Risks of Personal Loan Deferment

Understanding the benefits and risks of personal loan deferment helps you make informed decisions that can significantly impact your finances. Knowing what deferment entails allows you to weigh your options carefully, ensuring you choose a path that best supports your financial situation.

Personal Loan Deferment Benefits

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Personal Loan Deferment Risks

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EXPERT TIP

Be proactive and contact your lender before missing payments if you're at risk of missing a payment. This open communication may allow you to access the support you need during financial hardship and avoid hits to your credit score. — Alvin Yam, CFP®

How to Find a Personal Loan With Deferment Options

Not all personal loans come with deferment options. By shopping around and comparing different lenders, you can find a loan that meets your immediate financial needs and provides a safety net during times of hardship.

Research Lenders

Lenders differ significantly in the types of hardship programs they offer, including the specific conditions under which they approve a request. Start your search for personal loan lenders providing deferment options by exploring your options. Begin by visiting lender websites to review their loan products and hardship assistance policies. Many lenders detail their deferment options online, offering insight into the process and criteria for eligibility.

Additionally, reaching out directly to customer service representatives can yield valuable information. They can clarify any questions about deferment terms, eligibility requirements and the application process. Reading customer reviews and financial advice forums can also offer insights into other borrowers' experiences with deferment on personal loans from various lenders.

Questions to Ask When Shopping

Understanding the specific deferment options for a personal loan will ensure you choose the best lender for your financial situation. By asking potential lenders targeted questions, you can compare the deferment features of various loans, identifying the one that provides the most flexibility and security in times of financial hardship.

1

What are your eligibility criteria for personal loan deferment?

Asking about eligibility criteria helps you understand if you qualify for deferment under the lender's policies. This question clarifies the circumstances under which deferment is allowed, such as job loss, medical emergencies or other financial hardships. Knowing these criteria ahead of time can help you assess whether a lender's policy aligns with your potential needs.

2

What options are available for repaying deferred payments?

Understanding how your lender expects you to repay any payments deferred will assist you in planning your future financial obligations. Some lenders may require lump-sum repayment, while others may spread the deferred amount over the remaining loan term. Knowing these options allows you to choose a loan that matches your ability to repay under different circumstances.

3

Are there any fees associated with initiating a deferment?

Inquiring about fees is important because some lenders charge for the privilege of deferring payments. These fees can add to the cost of your loan and should be considered when comparing different lenders.

4

How will deferment affect my credit score?

It's wise to consider the potential impact of deferment on your credit score. Deferring your loan payments doesn't directly impact your credit score, but it can indirectly affect your credit if you miss a payment before your deferment is approved. Also, if your lender charges you interest during deferment, your balance will grow while you don't make payments. An increased balance uses more of your credit limit, which could lower your credit score.

5

Can I extend the deferment if my financial situation does not improve?

Knowing whether you can extend a deferment period offers additional peace of mind. This helps you understand the lender's flexibility if your financial hardship lasts longer than expected. It also indicates the lender's willingness to work with borrowers during prolonged periods of financial difficulty.

How to Defer a Personal Loan Payment

Knowing the steps to defer a personal loan payment is helpful for borrowers facing temporary financial difficulties. This enables you to navigate challenging times without falling behind on your loan or harming your credit score.

1

Contact Your Lender

Reach out to your lender as soon as you anticipate the need to defer a payment. Communication is key, and early contact allows more time to explore your options and complete necessary procedures. Your lender can provide detailed information on how to proceed with your deferment request.

2

Gather Required Documentation

Prepare any documentation that supports your request for deferment, such as proof of financial hardship, including job loss, medical bills or a significant change in income. This documentation is often required to process your deferment request. Having everything ready can expedite the review process.

3

Submit a Formal Deferment Request

Complete and submit the formal deferment request form provided by your lender. This may need to be done online or through a paper form. Be thorough and provide all requested information to avoid delays in processing your request.

4

Understand the Terms of Your Deferment

Once your deferment request is approved, make sure you fully understand the terms, including how interest will accrue during the deferment period and how you'll repay the deferred payments. Clarifying these terms helps you plan your finances around the deferment and ensures no surprises once payments resume.

5

Adjust Your Budget

With the deferment in place, adjust your budget accordingly. Use this time to manage your finances, prioritize spending and possibly build up an emergency fund if you can. This proactive financial planning can help you get back on track more quickly once the deferment period ends.

6

Stay in Communication With Your Lender

Maintain open lines of communication with your lender throughout the deferment period. If your financial situation changes — for better or worse — informing your lender can help manage your loan more effectively. This ongoing dialogue is valuable for any further adjustments to your payment plan.

When a Personal Loan Deferment Makes Sense

Deferment may not be viable for every situation, so it's important to understand when it makes sense to defer personal loan payments. Recognizing the right circumstances for deferment can help you make strategic decisions that protect your financial health while navigating temporary difficulties.

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Alternatives to Personal Loan Deferment

It's wise to explore all your options when experiencing financial hardship. While deferment can offer temporary relief, it's not always the best or only solution. Understanding other options can help you manage your debt more effectively, potentially avoiding increased interest costs or negative impacts on your credit score.

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FAQ About Personal Loans With Loan Deferment Options

MoneyGeek compiled a list of frequently asked questions to provide valuable insights, helping you better understand how deferment works, its impact and what to consider when seeking a personal loan with flexibility.

Missing payments after deferment will cause your loan to fall into delinquency and negatively affect your credit history. You may risk losing eligibility for future deferments with that lender, and additional fees, penalties or interest charges may be added to the total amount owed.

Once a loan is in default, the lender may sell the debt to a collection agency, which will attempt to recover the money. You may also face legal action, such as a lawsuit, a lien on your home or wage garnishment. If a payment has not been made for at least 120 days, lenders typically "charge off" the account, which means they have given up trying to recover the money. This may be reported as a "bad debt" on your credit report.

While similar, loan deferment and forbearance have key differences, mainly in how interest accrues. With deferment, interest may not accrue on certain types of loans, whereas with forbearance, interest typically continues to accrue on all loan types. The terms and conditions of each option depend on the lender's policies.

Eligibility for deferment varies by lender but typically requires proof of financial hardship, such as job loss, medical emergencies or significant income reduction. Lenders will often request documentation to support your deferment request.

Not all personal loans offer deferment options. Availability depends on the lender's policies and loan agreement terms, so verifying this before taking out a loan is important.

Some lenders may charge fees for processing a deferment request. These fees can vary, so asking your lender about any additional costs is helpful.

When applying for a personal loan, research lenders to find those that offer deferment options and understand their terms. During the application process, inquire directly about deferment policies and eligibility requirements.

The ability to extend a deferment period depends on the lender's policies. Some may allow extensions under certain conditions, while others have strict limits. Discuss this possibility with your lender beforehand.

The frequency with which you can defer payments on a personal loan depends on the lender's policies. Some lenders may allow multiple deferments under certain conditions, while others limit borrowers to a single deferment period. Clarify this with your lender to understand the flexibility you have.

Yes, in most cases, deferring your personal loan payments will result in an extended loan term. The deferred payments, along with accrued interest, are typically added to the end of your loan period, which can increase the duration of your loan.

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About Christopher Boston


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Christopher (Croix) Boston was the Head of Loans content at MoneyGeek, with over five years of experience researching higher education, mortgage and personal loans.

Boston has a bachelor's degree from the Seattle Pacific University. They pride themselves in using their skills and experience to create quality content that helps people save and spend efficiently.


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The content on this page is accurate as of the posting/last updated date; however, some of the rates mentioned may have changed. We recommend visiting the lender's website for the most up-to-date information available.

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