A loan deferment is a type of option provided by lenders when specific life circumstances come into play. Typically, a deferment allows the debtor to delay making payments on the loan for a specified period of time, or until certain events covered in the terms and conditions of the loan have been resolved. While the idea of a loan deferment is most often associated with student loans, lenders who underwrite other types of loans may also offer this option to debtors if and when specific events should occur.
With an education loan, lenders will sometimes offer the option of a loan deferment while the student is still actively attending a college or university in pursuit of a degree. There are usually requirements that must be met in order to postpone payments on the loan, such as carrying a certain number of quarter hours each session. Typically, students who are classified as full-time or at least half-time may be able to defer payments until after graduation. Some lenders will also allow a grace period after graduation, such as six months, allowing the graduate the opportunity to secure employment and begin generating income that can be used to initiate repayment of the student loan.
There are other factors that may also trigger a loan deferment. In the event that a debtor loses his or her job due to company closings or other covered events, he or she may be able to postpone payments for a period of time as the debtor seeks to secure new employment. There are also lenders who will extend loan deferment to debtors who have undergone some sort of catastrophic illness or injury, and are unable to generate the income to make the payments during a recovery period. Lenders usually provide specific guidelines regarding the circumstances that must be present in order to receive a deferment, the maximum duration of the postponement of loan payments, and how to go about applying for the delayed payment.
In many nations, military personnel may be able to receive a loan deferment under certain circumstances. For example, personnel who are being transferred to a remote area for some time and who are at certain levels or grades of payment may be able to defer making payments on a limited number of loans until that tour of duty is completed. There are also some provisions for loan deferment under certain hardship circumstances involved illness or injury that make it possible for the debtor to focus more on recovery and less on how to pay off the loan.
