We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Loan Forbearance?

Malcolm Tatum
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Loan forbearance is a situation in which a lender allows a debtor to deviate from the payment plan described in the original terms and conditions of the loan, at least for a short period of time. During the period of forbearance, the lender does not make any attempt to collect the past due amount. However, should the debtor be unable to bring the account up to current status by an agreed upon date, the lender is free to pursue collection of the total loan amount.

Just about any type of loan is subject to forbearance. Banks and other lending institutions may grant this temporary financial arrangement on mortgages, car loans, and even student loans. As long as there is a reasonable expectation that the debtor will be able to bring the loan current within a specified period of time, most lenders will consider the possibility of forbearance.

There are a number of reasons why lenders choose to grant a loan forbearance. Often, the situation has to do with an unexpected change in the finances of the debtor. This may involve the loss of a job and an ensuing period of unemployment. During that time, the lender may choose to accept reduced monthly installment payments on the loan, or even grant a short period of deferment in which the debtor does not have to pay anything. In both cases, the expectation is that the debtor will recover financially within a given period of time, and bring the loan current.

Both lenders and debtors benefit from the utilization of loan forbearance. Debtors receive some short-term relief from the pressure of attempting to keep up a payment that can no longer be managed. During this period, the lender does not make any attempt to collect on the debt. Many lenders will not report the forbearance period to credit reporting bureaus, and continue to classify the debtor as being current, which means that the debtor’s credit report does not reflect a negative line item.

Lenders often avoid spending a great deal of time and expense in collecting the debt. Because the loan forbearance is a simple arrangement between the two parties, there is no need to utilize costly legal action. Choosing to grant a period of forbearance to a client who has remained current up to the point when the financial reversal occurred can actually save the lender money. As long as the debtor regains a firm financial footing and catches up the payments in accordance with the terms of the forbearance, the business relationship can continue to the mutual benefit of both parties.

It is important to note that not every debtor is automatically entitled to a loan forbearance. Lenders typically consider the specific circumstances that surround the situation. For example, if the debtor is habitually late with payments before the current financial reversal takes place, there is little chance that the lender will be open to the idea of reduced or delayed payments, even for a short period of time. By contrast, a debtor who has always paid on time and proactively contacts the lender as soon as the reversal takes place has a much better chance of receiving this type of temporary financial arrangement.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By subway11 — On Apr 11, 2011

@Sunny27 - I had a friend that recently considered a forbearance for her student loan and she told me that it was not that easy to get. She told me that for the Perkins Loan forbearance you have to meet certain qualifications before they even consider your request.

First, the loan payment must be 20% or more of your total income. They also will allow a forbearance if you develop health problems or are caring for someone that is disabled.

If you are granted forbearance you still have to pay the interest accrued during that time and the typical time frame that they will allow for this forbearance is twelve to thirty-six months.

I doubt that they will offer a forbearance because you decided to study something else. Maybe if you continue studying they will not have you begin making payments, because you are still in school but I am not sure about that.

By Sunny27 — On Apr 09, 2011

@Latte31 -I know what you mean. I think that you really have to be realistic about what your initial earning potential might be so that you don’t run into a situation where you have to request a loan modification or student loan forbearance.

You also have to think about your field and honestly assess if you want to work in the field that got your degree in. I have heard of people getting law or even medical degrees decide after they have spent $150,000 or more that they want to work in a different field.

I think that is really hard to deal with and in order to avoid such a problem it is best to volunteer in the field that you are interested in to make sure that you want to make that investment. I don’t know how the forbearance option works if you shift gears like that and go into another field.

By latte31 — On Apr 08, 2011

@Bhutan - I heard that too. I also wanted to add that student loans cannot be eliminated in a bankruptcy so if you are placing the loans in forbearance and then considering filing for bankruptcy then you will still have to pay the student loans.

I think that a lot of students run into these problems because the costs of college tuition are so high. There really should be some personal finance classes in high school to prepare students for college expenses.

By understanding the finances behind a college education you are more likely to view the degree as an investment and will choose wisely.

While obtaining a degree from certain prestigious schools might make the candidate more marketable it should be noted that the average CEO has a bachelor’s degree from an average university with C grade point average.

So success is more about your drive and ambition and what you do with your talent then where you get your degree.

By Bhutan — On Apr 07, 2011

I just wanted to add that a financial advisor that I was listening to on television was saying that when someone requests student loan forbearance they will not have to make any payments at the moment but they do accrue additional finance charges so the balance will be even larger when the borrower resumes payments.

So although the bank is giving the borrower a temporary break on the payments, they are also charging them more interest in the meantime. After learning this I would do everything in my power to avoid a forbearance student loan.

It might be better to take on an extra job then let these loans go to forbearance.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.