If you’re struggling to make your mortgage or federal student loan payments, you may be eligible for forbearance, which literally means "holding back." This lets you temporarily stop making payments or temporarily reduces the amount you pay. Forbearance is different from deferment because during deferment you may not have to pay the interest that accrues during the deferment period, but during forbearance you are still responsible for paying all accrued interest.
What Is Mortgage Loan Forbearance?
Mortgage loan forbearance temporarily suspends or reduces your mortgage payments. You agree to the length of the period of suspended or reduced payments with your mortgage provider. When the forbearance period comes to an end, you have to start making regular payments again. You also pay a lump sum or additional partial payment for an agreed number of months to bring your loan up to date.
In most cases, forbearance is granted for up to 12 months. If you are between jobs or on disability leave from your job, forbearance may work for you. Each lender has its own eligibility criteria for forbearance, such as financial difficulties and medical expenses.
If you can't afford your mortgage payments on a long-term basis, forbearance won't resolve the problem. In that case, ask your lender for other options, such as an income-driven repayment plan, which bases the monthly payments on your income and family size.
How Does Forbearance Affect Your Credit Score?
You don't need to worry about your credit score if you opt for forbearance. While forbearance is noted in your credit reports, it doesn't affect your overall credit score. However, if you miss a loan payment or are late making a loan payment before your lender approves you for forbearance, this will affect your credit score.
What Is Excessive Student Loan Debt Forbearance?
Excessive debt forbearance is known as mandatory forbearance. If you meet certain criteria, your lender cannot deny forbearance of your student loan payments, compared to general forbearance, which is at the lender's discretion. You qualify for mandatory forbearance if you are considered to be in economic hardship, such as if your federal student loan payments are more than 20 percent of your gross monthly income. You may also be eligible if you are a teacher, a medical or dental intern, or are undertaking national service.
Forbearance allows you to suspend or reduce your monthly loan payments on a temporary basis, with the agreement of your lender.
Claire is a qualified lawyer and specialized in family law before becoming a full-time writer. She has written for many digital publications, including The Washington Post, Forbes, Vice and HealthCentral.