Many lenders will offer short-term deferment plans to help you pay off your loans if you cannot repay your loan due to financial hardship.
If your lender charges interest, temporarily suspending your payments may not be possible. A deferment is an option if you require short-term relief.
Calculate how much deferment can cost
Make sure you know whether your loan will continue to gather interest so you can calculate how much deferring will cost.
What is a moratorium for a personal loan?
You are not exempting yourself from monthly payments for a personal loan; rather, you extend the loan term by deferring the income for as long as the period lasts. For example, if you wait for two months’ payments, these payments will be added to the end of your loan.
You can defer a payment to delay it, but you won’t be breaking the loan agreement. Before the COVID-19 crisis, some lenders offered deferred payments as part of a hardship program. Other lenders tailor their hardship offers to individual borrowers.
Lenders may offer interest-free personal loans deferment. This means that interest would not accrue if you stopped paying. While you are deferring payments, other lenders may continue to charge interest. You’ll spend 38 months of interest if you delay two months of your 36-month loan repayment term.
How to delay a personal loan payment
You must contact your lender to request deferred loan payments even in times of crisis. Your credit score could be affected if you make late payments or skip them completely without notifying your lender. Your loan could become in default.
To defer your payments, a lender might ask you to log in, email, or call to answer some questions about your hardship. Few lenders have specific requirements regarding who can defer a loan.
Lenders might not be able to approve hardship applications immediately if they have a lot of applicants.
What deferred payment affects your credit
Deferring personal loan payments shouldn’t cause a significant drop in credit score. Lenders aren’t required to report them late or missed to credit bureaus.
If the lender denies your request for postponement or you stop making payments, your credit score will be affected.
To begin deferment, lenders will usually require that your account be modified. To avoid a credit rating hit, make sure you pay the loan payment if you have applied for hardship.
Other ways to cut costs during a financial hardship
Here are a few ways to get relief if you’re struggling to make personal loan payments.
Consolidate or refinance your loan. If you have good or excellent credit, refinancing or consolidating your debts with a lower-interest loan can be a way to cut costs.
If you have multiple sources of unsecured debt like credit cards, a debt consolidation loan can roll all your debts into one, making payments easier to manage. This option is usually best if the debt consolidation loan’s annual percentage rate is lower.
Look for local alternatives to a personal loan. If you’re trying to avoid adding debt, there may be charities, nonprofits or religious groups in your area that can offer assistance.
