Payment Deferment

Have you ever been in a situation where you couldn't afford to pay a critical bill on time? Whether you've experienced a medical emergency or job loss – or simply come up short with too many days until payday – exploring your payment deferment options may help you avoid financial pitfalls and get back on track.

How do deferred payment agreements work?

If you face financial hardship and can’t make a loan payment, your lender may approve a deferred payment agreement. This arrangement allows you to delay your loan payments for a short period of time until you can afford to resume regular payments.

Depending on the lender and type of deferment, you may be charged interest during your deferment period. This is often the case with student loan deferments. Although you won't have to pay that interest during the deferment, it will be added to the total amount you owe.

Other lenders may pause or cap interest while you're on a deferred payment plan. For example, borrowers who need to arrange a personal loan deferment due to active military service can't be charged more than the maximum interest cap set by the Military Lending Act.

How long can I defer my loan payments?

Deferred payment options will vary from lender to lender. Some lenders offer deferred payments for up to 90 days, while others may only allow you to postpone payments for a month or two.

It's important to note that you must meet the loan service provider's eligibility requirements to qualify for a payment deferral. You should continue making regular payments until you set up a new arrangement. The length of your approved deferment period may be based on whether you have a good payment history with the lender, so you should contact them at the first sign of financial hardship.

Benefits of deferred payment programs

There are several benefits to requesting a payment deferment:

You’ll have more money for essential expenses

With a loan payment off your plate, you’ll have more money to cover essential expenses, such as your rent or mortgage, utilities, and groceries. A deferred payment can also help you catch up on medical bills, student loans, and other payments.

You can avoid late fees

If you don’t apply for a payment deferment option, and you miss a loan payment, you’ll probably have to pay a late fee. While late fees vary from lender to lender, they can be costly. Adding late fees to your unpaid balance can significantly increase the amount you owe, making it more difficult to repay.

You may be able to pause interest

Some lenders offer interest-free deferred payment options, meaning that you won’t have to worry about accruing interest for a period of time. If you’re not sure whether your lender offers interest-free deferments, contact them to find out.

If your lender does charge interest during the deferred payment period, just know that you will be responsible for the accumulated interest in addition to the unpaid principal balance.

How to defer your loan payment

The deferred payment process will vary from lender to lender. In general, however, you'll need to follow these steps:

1. Request to set up a deferred payment plan

A payment deferment isn’t automatic, so you’ll have to contact your lender to let them know you’re interested in one. In some cases, they may have you fill out a deferred payment application.

2. Provide support documentation

Many lenders will only approve deferred payments if you can provide enough evidence of your financial hardship. To prove this, you may need to send them financial documents such as bank statements, pay stubs, or unemployment compensation.

3. Wait for approval

Depending on the lender, they may approve your request right away or shortly after you request the deferment. In many cases, the lender will inform you of their decision via phone or email.

4. Read the deferment agreement

Once you’re approved, your lender will send you an agreement. Read it carefully so you understand how the payment deferment works and when future payments resume.

What if I don't qualify for a deferred payment option?

If you've requested a deferment, written a letter of financial hardship, and provided the necessary documentation – but you still don't meet the lender's eligibility requirements, there are other options worth considering.

Refinance the loan

You may be able to refinance your loan, which essentially trades in your current loan for a new one – hopefully with a better interest rate and lower monthly payments.

Request a modified payment plan

A modified payment plan restructures your loan and may make your monthly payments more affordable. Modifying your loan may allow you to change the due date, which could help you avoid a missed payment. Just keep in mind that most lenders require you to have a good payment history before they'll restructure an existing loan, so if you've missed payments in the past, you may not qualify.

Consolidate your debt

If you're having trouble repaying a loan because you have more than one to take care of, debt consolidation might be a good option. Debt consolidation involves taking out a new loan to pay off multiple existing ones. This results in one convenient payment and cuts down on the number of additional interest payments you'll have to make.

Contact us to discuss your repayment options!

Select states allow you to defer a payment without penalty on your Advance America Installment Loan. You won’t incur additional interest during the deferred payment period, and the payment will be moved to the end of your loan term. Certain states also offer Installment Loan and Payday Loan refinancing options.

Contact us at the first sign of financial hardship to discuss your options. We'll work with you to find a solution.

About the Author

Jalin Coblentz has contributed to Advance America since 2023. His experiences as a parent, full-time traveler, and skilled tradesman give him fresh insight into every personal finance topic he explores.

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