When you put a loan on deferment, the lender allows you to stop making monthly payments for a specific amount of time without any penalties. Not all lenders offer deferment as an option on their loans, but it is common with student loans. This is because student borrowers generally cannot afford to make payments while they are in school. Other types of loans, including auto loans, mortgages and personal loans, are less likely to offer deferment.
Qualifying Cause
Lenders set the specific circumstances that qualify a borrower to defer loan payments. For federal student loans, these include being enrolled in school at least half-time, being unemployed, suffering extreme financial hardship, participating in active duty military service or carrying out a Peace Corps or Americorps assignment. In addition, you must not be in default to qualify for a deferment. Private lenders set their own rules, so contact your lender to ask whether you qualify.
Application
Fill out an application to request that your loan payments be deferred. Obtain the application by calling the lender and requesting to have one mailed to you or by going onto the lender's website and printing the correct application. Read and fill out all portions of the application. Missing information could cause your application to be delayed or rejected.
Supporing Documentation
Most lenders require that you submit documentation to prove that you are eligible for a deferment. For example, if you are requesting an in-school deferment for your student loans, you must show documentation from the registrar to prove that you are enrolled at least half time. If you are requesting unemployment deferment, you typically must have proof of receiving state unemployment benefits or having registered with an unemployment agency. Read the application to find out what documentation you need to submit.
Considerations
Deferment delays your loan payments but does not reduce the balance that you owe. In fact, it usually increases your balance because interest accrues while your payments are deferred. The only exception is with government-subsidized student loans, which the federal government pays interest on during periods of deferment. Therefore, you should consider whether you can find a way to make payments instead of entering deferment to avoid extending your repayment period and owing even more interest.
Tags: student loans, loan payments, make payments, offer deferment, payments deferred