Can One Defer Personal Loan Payments?

LOS ANGELES, December 30, 2021 (Newswire.com) - iQuanti: It's not uncommon for people to run into tough times while paying back a personal loan. Luckily, some personal lenders may offer deferment programs to give you a temporary break from monthly payments.

In this article, we'll explain how payment deferment for personal loans works, then go over some benefits and drawbacks to help you see if it's worth considering.

How Does Personal Loan Deferment Work?

Personal loan deferment lets you delay a loan payment without incurring any incremental fees or other penalties. The lender then tacks on any deferred payments to the end of the loan term.

Many lenders offer short-term deferment, such as one or two months. However, if your financial hardship continues, they may extend the deferment longer.Some lenders pause interest as well, while others let it continue to accrue.

Lenders won't necessarily give you deferment automatically. You have to contact them via phone, email, or your online portal and request it. 

Personal Loan Deferment: Pros and Cons

Here are some of the pros and cons that come with deferring your personal loan payments:

Pro: More Room in Your Budget

When the unexpected happens — from car breakdowns to job loss to large medical bills — pausing your payments with deferment gives you some extra money to work with. Covering these urgent expenses becomes a bit easier, getting you back on track faster.

Pro: Protects Your Credit Score

If you truly can't make a loan payment, personal loan deferment can prevent you from hurting your credit and paying late fees that come with missing a payment. 

Pro: You Avoid Collections or Losing Collateral

If you have an unsecured loan, deferment can help you avoid entering into collections. If your loan is secured, deferment can help you hold onto your collateral when you can't afford a payment.

Con: You'll Still Owe Later

Deferment doesn't erase any debt — it simply pushes it back. This means you'll be in debt for a longer period overall.

Con: The Lender Might Not Pause Interest

Not all lenders pause your interest when you defer your personal loan. You may have to pay back even more once you restart your repayment.

Con: Approval is Not Guaranteed

Depending on your lender, you may not get approved for your deferral request. You may have to seek out other ways to cover your loan payment.

Defer Personal Loan Payments in a Pinch

Deferment can save you money and protect your credit score when you're in financial trouble. Simply pausing payments can create immense temporary relief as you straighten things out.

However, deferment can keep you in debt longer, and your lender may continue accruing interest while your loan is paused. With that in mind, you should make sure you've checked your spending and cut any unnecessary expenses first. If you still can't afford your payment after doing so, deferral might be a good option.

Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.

Source: iQuanti, Inc.