Personal Loan Forbearance: What It Is and How to Request It

What Is Personal Loan Forbearance?

Personal loan forbearance is a temporary agreement with your lender to reduce or pause payments during financial hardship.

How it works:

• You contact your lender and explain your situation
• They review your hardship
• If approved, they reduce or suspend your monthly payment
• Typically lasts 3-6 months
• Interest usually continues to accrue
• After forbearance ends, you resume payments

Think of it as hitting the pause button on your loan payments, but the clock keeps ticking in the background.

Important: This is different from forgiveness. You still owe the money. You’re just getting temporary relief while you recover financially.

Forbearance vs. Deferment: What’s the Difference?

People often confuse these terms. Here’s the breakdown:

Personal Loan Forbearance

• Payments paused or reduced
• Interest continues accruing on most personal loans
• Lender’s discretion (not guaranteed)
• Shorter term (usually 3-6 months)

Used for:

• Temporary financial hardship
• Job loss
• Medical emergency
• Natural disaster

Personal Loan Deferment

• Payments postponed
• Interest may or may not accrue (depends on loan type)
• Sometimes built into the loan agreement
• Can be longer term

Used for:

• Student loans (returning to school)
• Military deployment
• Specific circumstances that are outlined in the loan agreement

Key difference: Forbearance is usually for unexpected hardship. Deferment is often for planned circumstances.

For most personal loans, lenders use “forbearance” to describe any temporary payment relief.

How Does Personal Loan Forbearance Work?

Let’s walk through the actual mechanics.

During forbearance, your payments are:

• Reduced to a partial amount (like $50 instead of $300)
• Or completely suspended ($0 payment)
• Depends on the lender and your situation

Most lenders continue charging interest during forbearance.

Example:

• Loan balance: $10,000
• Interest rate: 12% APR
• Monthly payment normally: $300
• Forbearance: 3 months of $0 payments

What happens:

• Month 1: $100 interest accrues (not paid)
• Month 2: $100 interest accrues (not paid)
• Month 3: $100 interest accrues (not paid)
• Total interest added: $300

Your new balance: $10,300

If the lender agrees to forbearance and you follow the terms, it typically won’t hurt your credit score.

The lender usually reports your account as “current” or “in forbearance” rather than “delinquent.”

After forbearance ends, you have several options:

• Resume normal monthly payments (most common)
• Enter a modified repayment plan
• Pay a lump sum to catch up
• Extend the loan term

Types of Forbearance Options

Lenders offer different forbearance structures.

Option 1: Full Payment Suspension

You pay $0 for the forbearance period.

Pros:

• Complete temporary relief
• Keeps money in your checking account
• No loan payment stress

Cons:

• Interest keeps adding up
• Bigger balance when you restart
• Longer to pay off

Best for: Severe hardship where you can’t afford anything.

Option 2: Reduced Payment

You pay a smaller amount than required.

Example:

• Normal payment: $400
• Forbearance payment: $100
• You save: $300/month

Pros:

• Some interest gets paid
• Less balance growth
• Easier to resume normal payments

Cons:

• Still need some cash flow
• Balance still grows (if $100 doesn’t cover interest)

Best for: Partial income loss or reduced hours.

Option 3: Interest-Only Payments

You pay just the interest portion.

Example:

• Loan balance: $15,000 at 10% APR
• Interest per month: $125
• Normal payment: $318 (principal + interest)
• Forbearance payment: $125 (interest only)

Pros:

• Balance doesn’t grow
• Much lower than full payment
• Easier to get back on track

Cons:

• Doesn’t reduce principal
• Still need some cash
• Extends payoff timeline

Best for: Moderate hardship where you can cover interest but not principal.

Option 4: Extended Forbearance with Loan Modification

Lender restructures your entire loan.

• Pause payments for 3-6 months
• Then, permanently reduce the monthly payment
• Usually, by extending the loan term

Example:

• Original: $12,000 over 3 years = $400/month
• Modified: $12,000 over 5 years = $254/month

Pros:

• Long-term affordability
• Lower monthly payments permanently
• Less risk of future default

Cons:

• Pay more total interest
• Longer debt obligation
• May affect credit report

Best for: Long-term financial change (not temporary hardship).

What Personal Loan Forbearance Costs You

Forbearance isn’t free. Here’s the real cost.

Accrued Interest

The highest cost is accrued interest.

Example:

• Balance: $8,000
• Rate: 15% APR
• Forbearance: 6 months
• Interest accrued: ~$600

When forbearance ends, that $600 gets added to your balance. Now you owe $8,600.

That extra $600 in principal means you’ll pay even more interest over the remaining loan term.

Total additional cost: $800-1,000 (depending on how long it takes to pay off)

Extended Payoff Timeline

Pausing payments means you’re not making progress.

Example:

• Original payoff: 3 years
• 6-month forbearance: Now 3.5 years
• Extended timeline: More total interest paid

Potential Fees

Some lenders charge:

• Forbearance application fee ($25-100)
• Administrative fees
• Modification fees

Most don’t charge fees for hardship forbearance, but always ask.

Opportunity Cost

While in forbearance, you’re not:

• Building equity in your loan
• Improving your credit score through on-time payments
• Moving toward being debt-free

The total cost of a 6-month forbearance on a $10,000 loan at 12% APR:

• Interest accrued: $600
• Extended interest from higher balance: $200
• Opportunity cost of delayed payoff: Priceless
• Total financial cost: $800-1,000

Is it worth it? If forbearance prevents default, absolutely.

How Forbearance Affects Your Credit Score

This is the question everyone asks.

If You’re Already Current

You call before missing any payments. Lender approves forbearance.

Credit impact:

• Usually minimal to none
• Lender reports account as “current” or “in forbearance”
• No late payment marks
• Your credit score stays protected

Best case: Your score actually improves slightly during forbearance because you’re not taking on new debt, and your credit report shows consistent status.

If You’re Already Late

You missed 1-2 payments, then requested forbearance.

Credit impact:

• Late payments are already on your credit report (can’t be removed)
• Forbearance prevents additional late marks
• Score already dropped 60-100 points from late payments
• Forbearance stops the bleeding but doesn’t heal past wounds

Long-Term Credit Impact

12-24 months after forbearance ends …

If you successfully resume payments:

• Credit score gradually recovers
• Positive payment history rebuilds
• Forbearance notation on the credit report fades in importance

If you default after forbearance:

• Major credit score damage (150-250 points)
• Collections, charge-offs
• 7 years on the credit report

Forbearance protects your credit during the hardship period. But you must successfully restart payments when it ends.

How Forbearance Affects Co-Signers

If someone co-signed your loan, forbearance impacts them too.

During forbearance:

• The forbearance appears on their credit report, too
• Their credit isn’t hurt (if you follow terms)
• They’re still legally responsible for the debt
• The lender may require the co-signer’s consent for forbearance

If you default after forbearance:

• The co-signer’s credit score is destroyed
• The lender can pursue them for the full balance
• Their income and assets are at risk
• Your relationship is damaged

Best practice:

• Tell your co-signer immediately about your hardship
• Get their input on the forbearance decision
• Keep them updated throughout
• Protect their credit as much as your own

Remember, your co-signer helped you. Don’t repay that kindness by destroying their credit.

Qualifying for Personal Loan Forbearance

Not everyone qualifies for personal loan forbearance. Here’s what lenders look for.

Eligible Hardship Reasons

Typically accepted:

• Job loss or reduced hours
• Medical emergency or disability
• Natural disaster affecting your area
• Death in the immediate family
• Military deployment
• COVID-19-related hardship (some lenders still honor this)

Usually not accepted:

• Overspending
• Want to buy something
• Vacation or discretionary expenses
• Simply don’t want to pay
• Small business loss (unless clearly documented)

It must be a temporary, unexpected hardship that’s beyond your control.

Documentation Required

Lenders typically ask for:

Proof of hardship:

• Layoff notice
• Reduced pay stubs
• Medical bills
• Disability documentation
• Death certificate
• Disaster declaration

Financial information:

• Recent bank statements (checking account, savings account)
• Income documentation
• List of monthly expenses
• Other debt obligations (credit cards, auto loans, student loans)

The more documentation, the better. Lenders want to verify legitimate hardship.

Lender Policies

Personal loan forbearance isn’t legally required like mortgage forbearance sometimes is.

Each lender has their own:

• Eligibility criteria
• Maximum forbearance duration
• Required documentation
• Application process

Some lenders are generous. Others are strict.

Credit unions tend to be more flexible than traditional banks. Online lenders vary widely.

How to Request Personal Loan Forbearance

Here’s the step-by-step process.

Step 1: Don’t Wait

Contact your lender before missing a payment.

Why timing matters:

• Better chance of approval
• Prevents late payment marks
• Shows good faith
• More options available

Call as soon as you realize you might miss a payment. Don’t wait until the due date.

Step 2: Contact Your Loan Servicer

Find contact information:

• Check your loan payment statement
• Lender’s website
• Personal loan payment portal
• Customer service number

Ask for “Hardship department” or “Forbearance assistance.”

Step 3: Explain Your Situation

Be honest and specific.

Good explanation:

“I lost my job on January 15th. I’m actively looking for work but haven’t found anything yet. I expect to be employed within 3 months. I need to pause payments for 3 months while I secure new income.”

Weak explanation:

“I’m having money problems and can’t pay right now.”

Include:

• What happened
• When it happened
• How long you expect it to last
• Your plan to resume payments

Step 4: Submit Documentation

Provide everything the lender requests:

• Proof of hardship
• Financial statements
• Written forbearance request

Use certified mail if sending physical documents. Keep copies of everything.

Step 5: Review the Agreement

If approved, the lender sends forbearance terms.

Verify:

• Length of forbearance (3 months? 6 months?)
• Payment amount during forbearance ($0? Reduced amount?)
• Interest accrual (how much will be added?)
• What happens after forbearance ends
• Any fees or charges

Don’t sign until you understand everything.

Step 6: Get It in Writing

Never accept verbal forbearance approval.

Get written confirmation including:

• Start and end dates
• Payment requirements
• Terms for resuming payments
• Impact on credit report

Save this document. You’ll need it if disputes arise.

Step 7: Mark Your Calendar

Set reminders for:

• When forbearance ends
• 30 days before it ends (to prepare financially)
• When the first post-forbearance payment is due

Don’t miss the restart. That would destroy your credit after all this effort.

Warning Signs You Need Forbearance

How do you know when to request forbearance?

Act if you experience:

• Job loss with no immediate prospects
• Income drop of 30%+ that will last 3+ months
• Medical emergency depleting savings
• Unexpected expenses exceeding $5,000
• Cannot pay monthly payments without incurring more debt

Don’t wait for:

• Missed payments
• Collection calls
• Overdrafted checking account
• Using credit cards to pay loans

The earlier you act, the better.

When NOT to Use Forbearance

Forbearance isn’t right for every situation.

Skip forbearance if:

You can make payments by cutting discretionary spending: Cancel subscriptions, reduce eating out, and postpone purchases. Save forbearance for true hardship.

You can refinance to better terms: Getting a lower rate and monthly payment through refinancing is better than forbearing.

You have adequate emergency funds: Use your savings account. That’s what it’s for. Rebuild it later.

The hardship will last longer than 6 months: Forbearance is temporary. If your situation is permanent, seek a loan modification or debt consolidation.

You’re avoiding an unaffordable loan: If you could never afford this loan, forbearance won’t fix that. Consider restructuring your entire debt situation.

Your Next Steps

Facing financial hardship is scary. But you have options.

This week:

• Assess your situation honestly (temporary or permanent?)
• Calculate how long you need payment relief
• Gather documentation of hardship
• List all monthly payments and prioritize which need forbearance

Contact your lender:

• Call before missing any payments
• Explain your specific situation
• Ask about forbearance options
• Request written terms

Compare alternatives:

• Could refinancing work better?
• Would debt consolidation help?
• Can credit counseling assist?
• Should you tap emergency savings instead?

Make a recovery plan:

• How will you restart payments?
• What changes will prevent future hardship?
• How will you rebuild credit and savings?

Remember, forbearance is a tool, not a failure. It exists precisely for situations like yours.

Used wisely, it provides breathing room to recover financially without destroying your credit.

Used carelessly, it just delays the inevitable default.

Be honest with yourself about whether you need it, whether it will help, and whether you can successfully resume payments when it ends.

Need help navigating forbearance or finding better loan terms? Visit LendWyse to compare personal loans with flexible hardship policies, access loan calculator tools to plan your recovery, and connect with lenders who work with borrowers facing financial hardship.