Can Forbearance Benefit You?
Forbearance is when a lender agrees to let you delay your
payments to them for a short period of time. That doesn't mean
the lender has forgiven the debt but just allows you to pay what
you owe at a later date.
Forbearance can be an option to someone that is experiencing
temporary financial difficulty. A forbearance agreement is most
commonly applied to two kinds of loans, mortgages and student
loans.
Forbearance Mortgage
A forbearance mortgage is when your lender agrees to let you
delay your monthly mortgage payments for a short period of time.
A forbearance mortgage is often combined with other programs
that bring your monthly mortgage payments current after a
negotiated period of time.
You sign a forbearance agreement that states the lender will
require you to pay the amount you owe at a later date. This is a
much better option than going into mortgage foreclosure.
Forbearance Student Loan
Most people have difficulty making student loan payments but
your loan servicer may allow you to apply for a forbearance
student loan. If they do grant you this option you will sign a
forbearance agreement.
Under the forbearance agreement you are still responsible for
interest as it accrues and any unpaid interest is added to your
principal balance. That means that you will pay interest on a
higher balance when you do resume your payments.
That can possibly make your monthly payment go up but is a much
better option than defaulting on your loans. Defaulting on
student loans can have negative effects on your credit score for
years.
A lender will review and analyze your financial situation
before offering the forbearance agreement. Once a lender or
servicer agrees to allow forbearance, it's very important that
you follow through on any promises you make.
The best thing to do is ask your lender or loan servicer if
forbearance is an option they will consider. Avoiding mortgage
foreclosure or paying on your student loans is always a better
choice and forbearance may be a good way to accomplish it.
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