There may be times when you cannot make payments on a loan due to extenuating circumstances, such as job loss or financial hardship. You may be able to receive a deferment on a mortgage, auto loan or federal student loans. Several options are available specifically for federal student loans, including military, public service, parental leave and education-related deferments. A loan deferment usually does not hurt your credit score, but the lender does report it to the credit bureaus.
Process
To find out the deferment options available, contact the lender directly. Explain your financial situation and ask for a deferment on the loan. The lender may send an application or direct you to an online version. Along with the application, you must also send paperwork documenting the need for the loan deferment, such as tax returns or a letter, depending on the lender's requirements.
Deferment Length
The type of loan you have -- and the policies of the lender -- determines how long you're allowed to defer payments. For mortgage and auto loans, one to two months is the minimum, but some lenders may allow deferments up to six months. For federal student loans, the length depends on the type of deferment. For example, you're typically entitled to an unlimited number of in-school deferments, but economic-hardship deferments are usually only available for up to three years -- in one-year increments. Private student loan deferments depend on the lender.
Interest
While in deferment, the loan continues to accrue interest. You can opt to capitalize this interest, adding it to the loan principal and increasing the amount you owe. The deferred monthly payments are added to the end of the original loan period, essentially lengthening the amount of time you spend in repayment. For loan deferments on subsidized federal student loans, no interest accrues during the deferment period.
Terms
If the lender agrees to suspend the payments, you'll receive paperwork stating the terms of the loan deferment, such as for how many days or months it was granted, any fees involved and how skipped payments are handled. If you don't receive the documentation, ask the lender to send it out. Keep the loan deferment paperwork throughout the deferment period and at least until the loan is paid off. It provides proof that the lender granted you a deferment in case trouble arises with incorrect reporting to credit bureaus by the lender.
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