Key takeaways

  • Deferment can temporarily pause your loan payments while keeping your accounts current.
  • Lenders usually ask for proof of financial hardship to approve you for loan deferment.
  • While payments aren’t required, interest may continue to accrue. This can result in higher payments when deferment ends.

Financial hardship can make it difficult to pay back loans. Deferment is an option that allows you to temporarily pause your loan payments with the lender’s approval. Although it is a short-term solution, deferring your payments can help keep your accounts in good standing while you get back on your feet. However, this option isn’t guaranteed for everyone. You must meet certain criteria to obtain approval.

What is loan deferment?

Loan deferment allows borrowers to postpone payments for a set period of time. This can range from one month to several months, depending on your lender. Deferment is typically available for installment loans, such as personal loans, student loans, auto loans and mortgages.

How personal loan deferment works

You’ll need to contact your lender and explain your situation to get a personal loan deferment or any type of loan. Though each lender has its own eligibility requirements for approval, you may qualify for deferment if you’re experiencing the following:

  • Financial hardship due to a reduction of hours or job loss.
  • Economic hardship due to medical reasons.
  • Hardship due to a life-changing event, such as losing your partner’s income.

Some lenders may also ask you to submit proof of these circumstances to approve you for loan deferment. That said, you’re still responsible for making payments until your request is approved. For instance, if you apply for deferment on February 1st and your payment is due on the 5th, you’ll still need to make that payment. Otherwise, you could face late payment fees and other consequences.

If your request is approved, you’ll get a letter stating the terms of your payment deferral, including details on interest accrual and when your next payment will be due.

Does personal loan deferment affect your credit score?

Deferment is actually a tool to keep your loan account in good standing while experiencing hardship. Because of this, your credit won’t be negatively impacted just because your loan is in deferment. If you stop making payments before your request is approved, your credit score may take a hit if the lender reports a late or missed payment. Make sure to check your deferment status and when it should become effective to avoid any unpleasant surprises.

How interest works during deferment

With the exception of subsidized federal student loans — interest and fees typically continue to accrue during deferment. This may cause your monthly payment to increase once the deferral period ends.

Alternatives to a personal loan deferment during financial hardship

While deferment is an option during financial hardship, there are other ways to make your loan payments more manageable, including:

Loan modification

Some lenders allow you to modify the terms of your loan to lower your monthly payment. This is typically done by extending the length of your repayment term. This can result in more interest paid over the life of the loan, but it can be a good option if you aren’t sure when you’ll be back on solid financial footing.


By refinancing your loans, you’re essentially taking out a new loan with new terms and interest rates to pay off your old one. You can refinance the loans separately or combine multiple with a debt consolidation loan.

This can lower your monthly payment by extending your repayment term or securing a lower interest rate. However, for this to work, you’ll need a strong credit score and a stable source of income. Otherwise, it may not be worth your while. 

Seek help from a credit counselor

If you’re deep in debt and don’t know the best payment management option, consider contacting a credit counseling agency. These organizations help consumers devise a plan to tackle debt effectively based on their financial circumstances. Most of the time, you can access these services for a nominal fee or even for free, depending on the agency.

The bottom line

Personal loan deferment lets you keep your account current while temporarily pausing your payments. It can be an effective personal loan management strategy if you need a short break from payments.

That said, this is a short-term solution designed to help you during a time of financial need. Do you seee your situation lasting more than a couple of months? Asking for a loan modification, refinancing or working with a credit counselor may be a better fit.