Personal Loan Deferment

How does personal loan deferment work? Going through financial hardship can make it very tough to repay your loans. And this is where personal loan deferment comes in. A personal loan deferment allows you to pause your loan payments temporarily with your lender’s approval.

Personal Loan Deferment

Although this solution is short-term, deferring your loan payment can help keep your account standing while you rise to your feet. However, you need to know that this option is not available and guaranteed for everyone. There are certain criteria to obtain your lender’s approval. Also, personal loan deferment has its limits, so you need to know how it works before you get yourself in more trouble.

Understanding Personal Loans Deferment

Deferred loan payments mean that if you’re having a tough time financially, you can take a break from paying back your loan for a while. Just like I have mentioned above, this break gives you some space when life throws unexpected money problems your way. It’s just like clicking the pause button on your loan payments to help you out when you need it most. It will help you avoid getting into trouble with your loan and messing up your credit score.

People usually defer loan payments when they lose their jobs, have a big drop in income, face hefty medical bills, become disabled, go back to school, or get deployed in the military. Financial lenders offer this option to help you handle these challenges without punishing you or messing up your credit history. But keep in mind that the rules for deferring loans can differ depending on the lender and the type of loan you have.

How Does Deferred Loan Payment Work?

To get any type of loan or a personal loan deferment, you will need to contact your lender and explain your situation to them. Although every lender has its requirements for approval, you may qualify if you are experiencing hardship due to medical reasons, a life-changing event, a loss of employment, or a reduction in job hours. Some lenders may ask you to submit proof of these situations to approve this option.

However, you will still be responsible for making payments until the lender approves your request. For example, if you apply for a deferment on January 1st and your payment is due on January 5, you will be required to make that payment. If you do not, you may face late payment penalties or other consequences.

Once your request has been approved, you will receive a letter about the terms of the payment deferral. It will include details on when the next payment will be due and details on interest accrual. Take your time to read through the deferment agreement provided by your lender. Look well at how long the deferment lasts, if any interest builds up. And when you’ll need to start making payments again,.

Will a Personal Loan Deferment affect my credit score?

This option is a tool that helps to keep your loan account standing while you are going through hardship. Due to this reason, your credit score will not be impacted negatively. However, if you quit making payments before the lender approves your request, your credit score will be affected. Because the lender may report a missed or late payment. Ensure that you check your deferment states well and know when they will be effective to avoid bad surprises.

How does Interest work during Deferment?

If your lender approves this option, interest will accumulate on the loan. So keep in mind that, although you are taking a break from payment, it is not free. You will have to pay for it later as interest. Review your most recent statement to get an idea of what the charge might be. Your payment will be divided into an interest portion and a principle portion. Think of the interest charge as the deferral cost. It will just be added to your loan, which you will have to pay back when you start making loan payments again.

Some lenders are more lenient and won’t charge interest. This only happens if there is a natural disaster, pandemic, or other factors that are affecting people. And it is outside their control. However, know that this leniency isn’t mandatory. Lenders have their own rules about charging interest in various situations.

Alternatives to Personal Loan Deferment

Although deferment is a good option when going through financial difficulties, there are other ways to make your loan payments manageable. They include;


When you refinance your loans, you’re changing your old loan for a new one with different rules and interest rates. You can do this for each of your loans separately or put them together into one with a debt consolidation loan.

Doing this might make your monthly payment smaller by either stretching out how long you have to pay or getting a lower interest rate. However, this only works if you have a good credit score and a steady income. Otherwise, it might not be the best option for you.

Loan Modification

Many lenders allow their borrowers to modify their loan terms to lower their monthly payments. This is done by extending the repayment term. However, this may result in more interest paid on the loan. But it is a nice option if you don’t know when you will get back on your financial footing.

Talk to a credit Counselor

If you don’t know the best payment management option and you are in deep debt, you should consider speaking to a credit counseling agency. These organizations help people come up with a plan to tackle their debt based on their financial situation. Most times, you can access these services for a small fee or even free of charge. This depends on the agency.


Personal loan deferment allows you to keep your account standing while pausing your payment temporarily. It is a good option if you need to take a quick break from payments. However, if you see the situation lasting for a long period, refinancing, loan modification, and speaking to a credit counselor may be a better choice. Top of Form