Personal Loans With Deferment Options

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.

Key Takeaways

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Personal loans with loan deferment options provide relief during financial hardship, allowing you to pause your payments temporarily and reallocate resources to immediate needs.

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Depending on the lender's terms, this pause can last for a few months or longer. Interest will continue to accrue on loans during the deferment period, which can increase the total loan cost.

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After a deferment period ends, you must repay the deferred payments and any accrued interest through adjusted payment plans or extended loan terms, depending on the lender's policies.

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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    Financial Relief During Hardship

    Deferment offers immediate financial relief when you're facing unexpected hardships, such as job loss or medical emergencies. By pausing payments, you can allocate your limited resources to urgent needs without falling behind on your loan. This temporary break can be a lifeline, allowing you to stabilize your financial situation without the added pressure of loan payments.

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    Protection of Credit Score

    By opting for deferment, you avoid missing payments, which can negatively impact your credit score. Lenders will report your payments as deferred, which will appear on your credit report but won't harm your credit otherwise. This is relevant for future financial opportunities, as a good credit score is often necessary for securing loans with favorable terms.

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    Avoiding Default

    Deferment can prevent the severe consequences of loan default, including legal action, garnished wages and a significant drop in your credit score. By working with your lender to temporarily suspend payments, you're taking a proactive step to maintain your loan agreement under challenging circumstances. This helps protect your financial future and preserves your relationship with the lender.

Personal Loan Deferment Risks

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    Increased Total Loan Cost

    Interest continues to accrue on your loan during deferment, even if payments are paused. This means the total amount you owe will increase, leading to higher overall costs by the time you've repaid the loan. This added expense is something to consider, as it can extend the loan term and increase monthly payments once deferment ends.

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    Repaying Deferred Payments

    After the deferment period ends, you face the challenge of repaying the deferred payments in addition to the accumulated interest. This can result in a significant increase in monthly payments or an extension of the loan term, which can strain future budgets. Understanding the repayment plan for deferred payments helps ensure it aligns with your financial capabilities.

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    Impact on Future Borrowing

    Frequent use of deferment can signal to lenders that you may be a higher-risk borrower. Even though deferment is not directly harmful to your credit score, lenders may consider your deferment history when evaluating you for future loans. This perception may limit your access to credit or result in less favorable loan terms in the future.

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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. 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.

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    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.

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    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.

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    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.

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    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.

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    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.

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    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.

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    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.

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    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.

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    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.

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    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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    Job Loss or Reduction in Income

    If you've experienced a job loss or a significant reduction in income, deferment can provide crucial temporary relief. This pause in payments allows you to reallocate limited financial resources toward essential living expenses or job search activities. It's a strategic choice that helps maintain your loan's good standing while you work toward stabilizing your income.

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    Medical Emergencies

    Unexpected medical emergencies can lead to sudden, significant expenses, straining your budget. In such cases, deferment allows you to focus resources on immediate health care needs without the added stress of loan payments. This financial breathing space can be invaluable as you navigate the path to recovery, both health-wise and financially.

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    Educational Pursuits

    Returning to school or pursuing further education can require a temporary shift in financial priorities. Deferment during this period can ease the financial burden, allowing you to invest in your education without the immediate pressure of loan repayments. It's a beneficial strategy for those focusing on long-term career growth and stability.

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    Natural Disasters or Catastrophic Events

    Natural disasters or catastrophes can unexpectedly disrupt your life and finances. In these scenarios, deferment provides essential relief, allowing you to channel resources toward rebuilding and recovery efforts. Events beyond your control can severely impact financial stability, and deferment offers a necessary pause during recovery.

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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    Loan Refinancing

    Refinancing involves taking out a new loan with better terms to pay off your existing loan. This can lead to lower interest rates or extended repayment terms, reducing monthly payments. It's an effective strategy for borrowers who qualify for better loan terms due to improved credit scores or changes in market rates.

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    Payment Plan Adjustments

    Some lenders may allow you to adjust your payment plan without going into deferment. This could mean temporarily reducing your monthly payment amount or extending the loan term to lower payments. Adjustments offer a way to make your loan more manageable without stopping payments entirely.

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    Financial Counseling

    Working with a financial counselor can help you develop a comprehensive plan to manage your debts, including personal loans. Financial counselors can provide budgeting advice, negotiate with creditors on your behalf and help you find ways to reduce expenses. This proactive approach addresses the root causes of financial strain and offers long-term solutions.

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    Emergency Assistance Programs

    Many communities offer emergency assistance programs for individuals facing financial hardship. These programs can provide temporary financial support, reducing the need to defer loan payments. They may cover essential expenses, allowing you to keep up with your loan repayments.

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    Debt Consolidation

    Consolidating multiple debts into a single loan can simplify your payments and potentially reduce your overall monthly payment. This is particularly useful if you can secure a consolidation loan with a lower interest rate than your current debts. Debt consolidation streamlines your finances, making it easier to manage without needing to defer payments.

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.

What happens if you fail to make regular monthly payments after your loan deferment period ends?

Is loan deferment the same as loan forbearance?

How do I qualify for a personal loan deferment?

Can I defer payments on any personal loan?

Are there fees associated with loan deferment?

How do I apply for a personal loan with a deferment option?

Can I extend the deferment period if my financial situation doesn't improve?

How often can I defer payments on my personal loan?

Will deferring my personal loan payments increase my loan term?

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.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, lender or other entity. Learn more about our editorial policies and expert editorial team.