Finance and Credit Professional

There are times in everyone's lives when finances become tight and it becomes difficult to make ends meet. Most student loan lenders are aware of this and have options available to you during times of financial hardship. Deferment and forebearance options may be available to you depending upon your circumstances.

Deferment

Derferment refers to postponing your loan payments for a certain amount of time. If you still remain in school at least half-time, most lenders will automatically defer your student loan until six months after you've stopped taking classes or you've graduated. Difficulty finding a job and economic hardship are two more reasons a lender may allow you to defer your loan payments.

Interest continues to accrue on your loan even when it is being deferred. You have the option of paying this interest if possible. Keep in mind that if you don't pay interest, it will be added to the balance of your loan, usually when the deferment period ends. If this happens, you may end up owing more than you orginally borrowed.

Forebearance

Another option available to help you in times of financial hardship is loan forebearance. There are several types of forebearance avaialble:

1. Reducing your loan payments allows you to make lower monthly payments on your loan. If these payments aren't enough to cover the interest, it will capitalize periodically. When this happens, it is addded to the balance of the loan, making the amount owned higher.

2. Extended payments will lengthen the term of your loan, thereby making the monthly payments lower. By extending the length of your loan, you will end up paying more in interest over the life of the loan than you would have if you stayed with the shorter term.

3. Temporary postponement of payments is similar to derferment. You and your lender agree on a period of time that you will be allowed to stop making payments. Interest will continue to accrue during this time.

Various lenders will have different requirements for deferment and forebearance. Some will require a fee for the convenience, while others may require you to fill out forms verifying your financial circomstances.

If you find yourself having difficulty making your monthly loan payments, the best option is to contact your lender immediately to avoid defaulting on the loan. If you don't, you may forfeit your derferment or forbearance options.

About The Author :

Peter Kenny is a writer for Finance 123. Please visit us at Secured and Prepaid Credit Cards and Car Loans

Related News

Senior Citizens Using HUD Reverse Mortgages Passes 300,000 (Senior Journal)
June 22, 2007 - More seniors than ever before are reaping the benefits of reverse mortgages to enjoy their golden years, according to the U.S. Housing and Urban Development. ...more

REAL ESTATE LAW Purchases Sales Mortgages / Re-Finance Residential / (Orangeville Citizen)
REAL ESTATE LAW Purchases Sales Mortgages / Re-Finance Residential / Commercial CORPORATE/COMMERCIAL WILLS & ESTATES Lockyer, Harrison LLP Barristers & Solicitors Continuing the practice of McAlpine & Vroom James D. Lockyer, B.Sc., LL.B. Christopher G. Harrison, B.A., LL.B. ...more

Retailer denies credit card unit sale to BBVA - Chile (Business News Americas)
Chile's largest supermarket chain D&S (NYSE: DYS) has not closed an agreement to sell 50% of its credit card unit Presto to Spain's BBVA (NYSE: BBV), D&S CEO Enrique Ostalé told reporters. ...more

First Data Reports First Quarter 2007 Revenue Growth of 12%; Operating Cash Flow from Continuing Operations of $440 ... (Business Wire via Yahoo! Finance)
DENVER----First Data Corp. today reported its financial results for the first quarter of 2007. Consolidated revenues were up 12% to $1.8 billion. Free cash flow was $232 million and operating cash flow from continuing operations was $440 million. ...more

Credit-Line Decreases Catch Consumers Unaware (Smart Money)
Credit-card companies are lowering credit limits, putting some cardholders in hot water. ...more