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What is Loan Forbearance?

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In today’s tough economy you may find yourself needing some kind of financial help at some point in your life. This usually occurs in the form of a loan. There are also many types of loans that you can qualify for and therefore many types of loan holders.

When you find yourself unable to meet your repayment commitments, you will find that there is considerable pressure on you to try and make the required repayments or to find some other solution to the problem.

Loan Forbearance

Loan forbearance is one of the ways that can help you meet the commitments that you’ve made and take some of the pressure off you. It is important to know that not all debtors will qualify for forbearance and therefore you need to make sure that you meet the requirements of forbearance.

Forbearance happens when you are given an extra amount of time to pay off the loan, or you are given lessened repayments over a period of time. Although there is also deferment, forbearance is different as you are not automatically entitled to it. You need to apply for forbearance and there is no guarantee that you will be offered the opportunity to implement forbearance.

How it works

In the application process there are several things that you need to prove. The first few things have to do with your personal situation. Are you doing a residency in either a hospital or for a social services institution? What are your commitments in terms of a federal study loan? What other conditions can you offer to motivate why you should be granted a loan forbearance?

Once the loan forbearance has been granted, you will negotiate around the repayment period, the interest that your loan will accrue and the amount of your reduced payment. If you at any time do not comply with this agreement, there is a possibility that the forbearance can be forfeited and your loan becomes immediately payable.

Loan forbearance should not be taken on lightly, as it may affect your credit rating and it may also cost you more money in the long run as interest still accrues on the capital amount. If you can’t pay the interest as it accrues, it becomes part of the capital amount that you need to pay and interest now accrues on that as well. This is called compound interest.


No matter what your situation, it is always better to take loans out that you know will not jeopardize your financial situation. If you know that it is going to be a stretch to pay the loan back, you probably need to look at a lesser amount, or try a different option all together.

Loan forbearance is often just a lengthening of your agony. It is far better to be either debt free, or to be responsible with the debt that you incur. Repayment is a crucial part of becoming debt free.

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Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.


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