Loan Deferment: What You Should Know

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By: Kia Jackson

Jun 30, 2024

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4 minute read

Summary

Struggling to make monthly payments on a loan? Consider exploring loan deferment as a temporary solution. Learn the ins and outs of loan deferment.

In this article:

Financial hardships can happen. And when they do, you could find it difficult to make your monthly loan payments on time. Lenders may be willing to talk to you about a payment option called a loan deferment. But before you agree to defer a payment with a creditor, it’s important to understand the pros and cons of this payment arrangement.

What is loan deferment?

Loan deferment is an option designed for borrowers facing tough financial times. It allows you to temporarily lower or pause your loan payments, although this process may differ among lenders. Loan deferment aims to ease your financial burden, giving you the space and time to get your finances in order. Deferment doesn't waive any payments; it merely shifts them to a later date or reduces them for a while. It's important to remember, though, that interest might still build up during this period depending on the type of loan you have, which could increase the total amount you'll pay back over the life of the loan.

How loan deferment works

Eligibility criteria for deferment often depends on specific lender requirements, which may differ significantly. Loan deferment allows you to make smaller payments for a certain time, helping you avoid late fees and giving you a chance to stabilize your financial situation. Keep in mind, however, that the interest that accrues during this period may extend the time it takes to pay off your loan. For precomputed accounts, customers pay a fee to defer their payment.

Before you decide to go ahead with a deferment, it's wise to discuss details with your lender. You'll want to understand the ins and outs of your deferment options, including how long you can defer payments, any limits on the number of times you can defer, and how this decision might affect the terms of your loan overall. This way, you can make a well-informed decision that helps you navigate your financial challenges more effectively.

Things to consider before applying for loan deferment

If you decide to apply for a deferment, it’s wise to know the details and long-term consequences. You’ll want to carefully evaluate your situation and understand the implications. Taking the time to address these considerations will help you better determine whether loan deferment is the best course of action for your financial well-being.

Here’s a streamlined guide to help you make an informed decision:

Understand your financial needs

Think about why you're considering deferment. Is it due to a temporary setback or a longer-term financial challenge? This will help you gauge if deferment is the right approach or if you need to explore other options.

Assess the impact of interest accumulation

Realize that interest may still accrue during the deferment period, increasing the overall amount you owe. Consider whether this added cost will be manageable in the long term.

Grasp the terms and conditions

Each lender has specific policies for deferment, including how it affects interest, the length of your loan and who is eligible for one. Make sure you understand these policies fully to avoid unexpected consequences.

Consider the effect on your credit

Typically, a formal deferment won't hurt your credit score if arranged properly with your lender. However, it's crucial to confirm this to protect your credit health.

Explore other financial solutions

Look into alternatives that may be more suitable for your situation, such as refinancing for a better rate or revising your budget to prioritize loan payments.

Plan for the future

Think about your financial strategy after the deferment period ends. Planning ahead will help you resume payments more comfortably, especially if they increase due to accrued interest.

Seek professional advice

Consider consulting a financial advisor. Talking to a professional can provide clarity and help you navigate your decision with confidence.

Take the first step today

If you’re having a difficult time making your loan payment, talk to your lender before you get behind in payments. Working together, you may find a solution that keeps your financial hardship from having a negative impact on your financial well-being. If you’re a customer with OneMain, call 1-800-961-5577 to learn more about options for managing your account.

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This article was updated in 2020 and 2022. Kim Gallagher contributed.

This article is for general education and informational purposes, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any purpose and is not intended to be and does not constitute financial, legal, tax, or any other advice. Parties (other than sponsored partners of OneMain Financial (OMF)) referenced in the article are not sponsors of, do not endorse, and are not otherwise affiliated with OMF.

Frequently asked questions

Here are a few things that affect your eligibility

  • Financial history Credit history
  • Income and expenses
  • Loan purpose
  • Whether you have filed for bankruptcy
  • State of residence

Before you close your loan, OneMain will need the following documents from you:

  • A copy of a valid, government-issued ID (driver’s license or passport)
  • Your Social Security card
  • Proof of residence (driver’s license with current address, utility bill, or signed lease)
  • Proof of income (pay stubs or tax returns)

We may ask for more info based on your unique situation. Take the next step and start your loan application today

  • From the start of the application to receiving the funds could be as quick as one day.*
  • Completing the online loan application: Takes just minutes to complete and see your offers*
  • Signing your loan documents: After final loan approval, signing your closing documents takes about 30-45 minutes.
  • Receiving your funds: When using your debit card to receive funds, you can get your money as soon as an hour after signing the loan docs.1 Funds can also be paid out by direct deposit (ACH), which are available approximately 1-2 banking days after loan closing. A check can be issued as soon as the same day as the closing.

*Timing may vary based on: when you submit your application, how many documents are needed for approval, and how long it takes for OneMain to receive, review, and verify those documents, and whether your loan is secured by collateral, among other factors.

Are you still wondering "Is a personal loan right for me?" Don't worry – we're here to help. Just call (800) 961-5577 or find a branch near you.

If you're approved for a loan, you may see secured or unsecured next to your offer. A secured loan requires that you provide collateral, like a vehicle. An unsecured loan doesn't require any collateral from you.

Keep in mind that there are eligibility requirements such as the condition and age of your motor vehicle and proof of insurance. Also, if a borrower defaults on a secured loan, the lender has the right to take the collateral.