What Is Personal Loan Deferment?

Q: What happens when you defer a personal loan?

When you defer a personal loan, your loan payments are temporarily put on pause for a predetermined period of time, usually because you are experiencing financial hardship. However, your loan will continue to accrue interest during this period.

Q: What is the grace period on a personal loan?

If you miss a loan payment, your lender may allow you a grace period of 30 days without fees or penalties. Check with your lender to be sure.

Q: Can you get in trouble for not paying a personal loan?

If you don’t pay your personal loan, your credit score will take a significant negative hit, making it harder to secure credit in the future. Your lender may also charge you fees and penalties, and take steps to recoup the loan such as sending it to a collections agency or garnishing your wages.

Austin KilhamUpdated January 22, 2025

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent, and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or network providers. Read more about our Editorial Guidelines and How We Make Money.

If you’re in a tight spot financially, you may be stressing out about trying to make your personal loan payments. Fortunately, there are options that can help. One you may want to consider is a personal loan deferment, which allows you to temporarily stop repaying your loan so you can get your finances back in order. Read on to learn about personal loans with deferred payments and how they work.

What Is Personal Loan Deferment?

A personal loan deferment is a temporary break from making your loan payments that has been approved by your lender. You contact your lender and explain the reason for your financial hardship. If the lender approves it, they allow you to halt payments for a set period of time. The idea is during the deferment period you’ll become financially secure enough to start loan payments on a regular schedule once again. Asking for a deferment is a much better option than failing to make loan payments. If you default on a personal loan, your credit score will take a big hit, making it more difficult to secure credit in the future. In addition, your lender might take you to court and try to garnish your wages. They may also sell your debt to a collections agency.

Getting a Personal Loan Deferral

To get a deferment on your personal loan, you’ll need to speak with your lender. Explain your circumstances and the reasons for your financial hardship. For instance, perhaps your hours have been cut back at work, which has reduced your pay. Your lender is not required to give you a deferment. However, it may be likely that they will if you are going through financial hardship. Letting you temporarily defer your personal loan payment means they don’t have to take you to court or send your case to collections, which can be expensive for them. They may see a temporary halt to your loan payments as a better option for them.

Reasons You May Defer a Personal Loan

Before offering a deferment, lenders will typically require you to demonstrate that you’re experiencing financial hardship. Below are some common situations where deferment may be a viable choice.

Job loss: Unemployment can strain finances, making it hard to meet monthly loan obligations.
Medical emergencies: High healthcare costs might leave you with little room for loan payments.
Natural disasters: Recovering from events like hurricanes or fires may prioritize other expenses.
Family emergencies: Caring for a loved one or dealing with unexpected family costs can impact your budget.
Educational pursuits: If you return to school, lenders might offer deferment during your studies.
Military service: Active-duty service members may qualify for deferment under specific protections.
Economic hardship: Lenders might provide relief during periods of financial instability.
Temporary cash flow issues: Unexpected expenses may necessitate a temporary pause in payments.

How Long Can You Defer Your Personal Loan Payments?

You will need to work out the length of your deferment with your lender. Some lenders approve deferments for a month at a time, but you may be able to get a longer deferment approved. It’s important to know exactly when your deferment starts and ends so you’ll know when you’re expected to start making payments again. The repayment period for your loan will typically be extended for as long as your payments were deferred. Recommended: Personal Loan Deferment vs Forbearance

Will Deferring a Personal Loan Hurt Your Credit Score?

Your credit should not be negatively impacted if your lender has approved a personal loan deferment. In fact, deferring a personal loan may help protect your credit score. Lenders report on-time payments and late payments to the major credit reporting bureaus. On-time payments help your credit history, while late payments are detrimental. If you and your lender have agreed to deferment, your payments will be reported as deferred as opposed to late.You may want to check your credit score to make sure that the deferred payments are being recorded correctly. You can request your credit report free once per year from each of the credit reporting bureaus: TransUnion, Experian, and Equifax.

Will a Deferred Personal Loan Accrue Interest?

While it’s ultimately up to your lender, interest will typically accrue on a personal loan that’s in deferment. To get a sense of how much interest you’ll pay, take a look at the interest amount on your most recent loan statement. You can estimate that that’s the amount you’ll pay for every month you defer your loan. The interest will be added to your loan principal and you’ll start paying it back when your deferment ends.

Pros and Cons of Personal Loan Deferment

As you’re deciding whether or not to defer your loan, it’s important to weigh the advantages and disadvantages.

Pros	Cons
Allows you to temporarily pause your personal loan payments when you’re experiencing financial hardship	Typically, deferment is only available to borrowers who are experiencing hardship
Personal loan deferment typically does not affect your credit score	Your personal loan will accrue interest while it’s in deferment that you’ll repay when you start making loan payments again

Alternatives to Deferring a Personal Loan

In addition to deferment, there are other options you may want to consider.

Loan Modification

If your lender won’t give you deferment, they might be willing to give you a loan modification to make payments more manageable. For example, they might be willing to extend the term of your loan. This stretches out the time you have to make your payments, and it can make your monthly payments smaller. However, this also means you'll be paying interest for longer, which can increase the amount you ultimately pay.

Refinancing

You could also refinance your loan with another lender. When you refinance, you take out a new loan with better terms to pay off your old loan. If your credit is good, you might even be able to get a new loan with a lower interest rate. Lowering your interest rate or extending the length of the loan are ways to lower your monthly payment and make it easier for you to manage.

The Takeaway

If you’re in danger of falling behind on your personal loan payments, reach out to your lender and tell them about your hardship. They may offer you a personal loan deferment to temporarily put your loan payments on pause to help you get back on your financial feet. Or they might have other options that make your monthly loan payments more manageable. If your lender can’t offer you a solution, you may want to consider looking for another lender who could refinance your loan to a new one with better terms and possibly even a lower rate. Being proactive is far better than missing payments or defaulting on your loan. If you’re considering a personal loan refinance, Lantern by SoFi can help. In our online marketplace, you can explore current personal loan interest rates and terms from multiple lenders to find the loan best suited to your needs. Find and compare personal loan options with Lantern.

Frequently Asked Questions

What happens when you defer a personal loan?

What is the grace period on a personal loan?

Can you get in trouble for not paying a personal loan?

Photo credit: iStock/DNY59

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About the Author

Austin Kilham

Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.

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