Do Private Lenders Ever Defer Loan Payments?

With so many people's finances affected by the pandemic--such as loss of personal or business income due to lockdowns--, it stands to reason that folks are having a hard time paying their bills. For those of you with traditional loans, you may have been offered some sort of forbearance by your lender to help you make it through these hard times. But what about a loan with a private lender? Do private lenders ever defer loan payments?

Private lenders generally aren't obligated to let you defer your loan payments -- but that doesn't mean yours won't work with you if you're experiencing a true financial hardship. As such, it pays to reach out to your lender, explain what's going on, and ask for some amount of temporary relief. Your lender might agree to let you hit pause on your payments for a few months, or make interest-only payments until you're back on your feet.

To be clear, for private loan deferment to be on the table, you'll need to prove that you're deep in the throes of a financial crisis. That could include:

• Losing your job
• Losing a spouse or loved one and grappling with a loss of income and funeral expenses
• Being unable to work due to illness or injury

Sharing the details of your financial circumstances could sway your lender to have a heart and suspend your payments temporarily. But if you are allowed to defer your private loans, you can bet that interest will continue to accrue on that debt while you're not making payments.

If your private lender does not agree to let you defer your payments, you can ask for a lower monthly payment -- either temporarily or permanently. That, too, should provide some financial relief when you're going through a tough time.

Don't just skip those payments

As tempting as it may be to ignore your loans when money is tight, don't make the mistake of neglecting to pay anything toward them without contacting your lender. If you stop making payments and default on your debt, your lender could go after you for that money -- namely, by obtaining a court order to garnish your wages.

That's a good way to make a difficult financial situation even worse, so communicate with your lender when you start struggling with your debt payments, and don't hesitate to advocate on your own behalf for relief. And if your lender really doesn't budge, look into refinancing your loan. That way, you'll get a new lender that may be more reasonable.

Personal Loan Deferment Alternatives

Loan deferment is a great option if your private lender offers it—but it’s not your only option. Here are some other things you can do if your private lender doesn’t offer deferment, or if you’d rather try something else:

Ask Your Lender for a Modified Payment Plan

Technically speaking, a deferment is a modification of your payment plan. But if your financial setback is permanent and not just temporary, a better option might be to ask your private lender to extend your loan’s term length. This stretches your payments out over a longer period of time. And while it can be more expensive in the long run, it also makes your monthly payments smaller and easier to work into your budget.

Refinance Your Loan

If your private lender isn’t willing to change your payment plan, another option is to take your business to another lender entirely by refinancing your personal loan. It may even be possible to get a lower interest rate while you’re at it. Keep in mind, however, that you may need a good or excellent credit score to qualify for better terms.

Speak With a Credit Counselor

If you know you can’t make your payments now and your private lender isn’t willing to work with you, consider speaking with a credit counselor. A counselor also can be helpful if you’re not sure whether deferment is the best option for you—or if an alternative is the better fit. Just make sure you’re careful here because there are a lot of credit repair scams that have even been the target of legal action from the Consumer Financial Protection Bureau.

To avoid fraudulent credit counselors, we recommend getting a referral through the National Foundation for Credit Counseling, a nonprofit organization that provides affordable or even free financial assistance for people with financial difficulties.