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What To Know About Personal Loan Deferment

Victoria Araj5-minute read
PUBLISHED: February 28, 2024


Unplanned costs and life events can sometimes make it hard to keep up with loan payments. With lender approval, loan deferment can help you take a break from repayment and regain your footing. Learn how personal loan deferment works, how to get a deferred payment loan and some other ways to tackle payments if faced with financial hardship.

How Do Deferred Payments Work On Personal Loans?

When you defer a personal loan, you temporarily stop repaying the loan for a set period of time. This pushes your loan’s maturity date back and extends your repayment term. How long you can defer your monthly payments will depend on your lender’s policies.

Does Interest Accrue During Deferment?

Most deferred personal loans continue to accrue interest. With a longer repayment period, interest accumulates on the loan for a longer time. As a result, you’ll have more to repay in interest when the deferment period ends.

You can use our Simple Loan Calculator to get an estimate of your new payment and the total amount you’ll pay on the loan. Use the number of months you have left with your new loan term. If you’ve paid off part of the loan principal, use your current balance rather than the original loan amount.

Let’s say, for example, that you have a $10,000 remaining loan balance with an 8% interest rate and 30 months of repayment left. If you want to defer your loan payment for 6 months, your new repayment term would be 36 months. If you pay off the loan in those 36 months, you’d end up paying an additional $400 in interest.

Does Deferment Hurt Your Credit?

In most cases, deferring a loan shouldn’t hurt your credit. Most lenders don’t report deferred loans to credit bureaus, but your credit score can take a hit if you stop making payments without your lender’s approval.

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Personal Loan Deferment Vs. Forbearance

Deferment and forbearance have the same meaning for many types of loans. They mainly differ in the context of federal student loans. While you may not have to repay the interest that certain student loans accrue while in deferment, you’re often on the hook for any interest charges your student loans rack up during forbearance.

Outside the scope of student loans, you’ll likely see deferment and forbearance used interchangeably. And you’ll likely be responsible for repaying any interest accrued in deferment and forbearance.

When Should You Consider Loan Deferment?

Deferment can seem like a viable solution if repaying your loan becomes overwhelming. Or maybe a repayment pause will enable you to cover expenses that it may not otherwise be possible for you to pay for. This temporary relief might not benefit you long term, however.

In short: You could put your future self in a tougher position. If the loan incurs more interest, your monthly payment after deferment may be higher than it was originally.

Loan deferment also isn’t a guarantee. You should talk with your lender about setting up a deferment plan. Your lender could ask you to provide supporting documentation to explain your situation. They can then use this information to decide whether deferment is the right option for you. Ultimately, they’ll let you know if they approve your deferment request.

It’s worth noting, too, that deferment is probably only worth considering if you have sufficient proof of your need. Until you have such proof, do your best to make your minimum payment. Skipping payments without your lender’s authorization can damage your credit. And if you stop paying altogether without permission, you could default on the loan.

Deferred Loan Pros And Cons

Here’s a chart you can use to quickly review the potential advantages and disadvantages of deferring a loan.

Deferred Loan Pros

Deferred Loan Cons

A pause on loan payments

The pause on loan payments being only temporary

Funds typically used for loan payments now being available to cover other expenses

Interest accruing for a longer period, resulting in borrowers paying more for the loan

No direct impact on credit

The possibility deferment won’t be approved

How To Defer Payment On A Personal Loan

If deferment still seems like a good option once you’ve considered its potential impacts, you can follow these steps to kick-start the process:

  1. Reach out to your lender. If you want to defer your personal loan payments, your first step is to discuss the matter with your lender. They can let you know about any deferment options that are available.
  2. Submit any requested documentation. Once you confirm deferment is possible, you can proceed with your lender’s next steps. This could mean submitting evidence of your need to defer payments.
  3. Receive an answer from your lender. After your lender reviews your circumstances, they’ll make a decision. This may take time, and you might not hear back instantly, so be sure to keep up with payments while you await an answer.

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Loan Payment Deferment Alternatives

Deferring your personal loan payment is a short-term fix that ends up prolonging your loan repayment period. And there’s always a chance your lender won’t approve you for deferment. Fortunately, other strategies can make repayment manageable – even during financial hardship. Let’s check out a few alternative approaches.

Consider Debt Consolidation

If you’re juggling multiple debts, you could look into debt consolidation. This involves taking out one loan to pay off all your debt, including credit cards and other loans. You’ll have a single monthly payment and interest rate on the consolidated loan. If you have stronger credit than you did when you were approved for your old loans or credit cards, you may qualify for a better term and a lower interest rate on the new loan.

Before using any refinance strategy, you should consider a few factors. For one, borrowers with weaker credit may not be able to secure favorable loan terms. And, of course, you should only take on a new loan if you’re confident you can handle the payment. Taking inventory of your finances and checking your credit score can help inform your decision.

Think About Debt Settlement

In extreme situations, you may be able to negotiate with lenders to settle part of your debt. Under this scenario, you and your creditor will agree on the new amount you’re responsible for paying. How much of the debt your lender will forgive depends on their policies and your circumstances.

While having a portion of your debt forgiven may seem ideal, it can have drawbacks. For example, if you work with a debt settlement company, they tend to charge service fees worth around 15% – 25% of the debt they help resolve. They may also tell you to stop making payments during negotiation as a way to demonstrate your need for settlement. This can lead to a substantial drop in your credit score.

Talk With A Debt Counselor

If you’re unsure of the best debt repayment plan for your situation, a debt counselor may be able to help. They can assist you in finding the most appropriate repayment strategy for your financial needs. Many nonprofit credit counseling organizations offer these services free of charge.

Final Thoughts

Loan deferment can be a quick way to get back on your feet if you’re struggling to keep up with payments. But you’ll eventually again be stuck with a loan payment, along with additional interest charges. You might want to explore other repayment options to see if you can avoid paying more on your loan.

If you’re interested in debt consolidation, you may be able to use a personal loan to do so. Start an application today with Rocket LoansSM to see what you prequalify for.

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Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.