How Does Personal Loan Deferment Work?

How Does Personal Loan Deferment Work

How Does Personal Loan Deferment Work?

In this blog we are looking at personal loan deferment, what it is, the pros and cons and alternatives. Let’s take a look: 

Loan deferment and how it works 

A loan deferment refers to a temporary postponement of loan repayments. During the deferment period, the borrower is not required to make regular monthly payments. The interest may continue to accrue, depending on the type of loan and its terms. Deferment is often used to provide borrowers with financial relief during periods of economic hardship, such as unemployment or other unexpected financial challenges. 

Difference between deferment and forbearance 

The terms “deferment” and “forbearance” are often used interchangeably. Both involve a temporary pause in loan repayments. However, in some cases, forbearance may imply that the interest continues to accrue, while deferment may indicate that interest payments are also postponed. The specific terms and conditions of deferment or forbearance will vary depending on the lender and the type of loan.  

Deferment on a personal loan and qualification 

In the UK, deferment is commonly associated with student loans, rather than personal loans. For personal loans, deferment options are generally less common and will depend on the lender’s policies. In cases where deferment is available, the qualifying situations may include financial hardship, loss of employment, illness, or other valid reasons that temporarily prevent the borrower from making loan repayments. 


How to get personal loan deferment 

To obtain deferment on a personal loan, borrowers should contact their lender or loan servicer directly. The lender will evaluate the borrower’s situation and determine if they meet the criteria for deferment. Borrowers may need to provide documentation or proof of their financial circumstances to support their deferment request. 

Pros and cons of personal loan deferment: 


  • Provides temporary relief from making loan payments during financial hardship. 
  • Helps avoid defaulting on the loan and potential credit damage. 
  • Gives borrowers time to stabilise their finances before resuming repayments. 



  • Interest may continue to accrue during the deferment period, increasing the overall cost of the loan. 
  • The loan term may be extended, leading to a longer repayment period. 
  • Deferment might not be available for all types of personal loans or with all lenders. 


Alternatives to personal loan deferment 


If deferment is not an option for you, borrowers can inquire about loan forbearance, which is another form of temporary payment suspension. Like deferment, forbearance may result in accrued interest.  

Repayment Plans 

Some lenders may offer flexible repayment plans, such as reduced monthly payments or extended loan terms, to accommodate borrowers facing financial difficulties. 

Debt Consolidation or Refinancing 

Combining multiple loans through debt consolidation or refinancing might provide more manageable repayment terms and lower interest rates. 



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