Simple definition
Forbearance is a temporary pause or reduction of your loan payments, granted when hardship makes paying difficult. Unlike some pauses, interest generally keeps accruing during forbearance, so the balance can grow while payments are stopped. Think of it like hitting pause on a taxi ride while the meter keeps running: the trip stops, but the cost quietly keeps adding up.
Why it matters
Forbearance can prevent missed payments and default during a rough stretch, which protects your credit. But because interest usually keeps building, the balance can be larger when payments resume. Use it as short-term relief, and confirm exactly how interest is handled with your loan servicer.
Real-life example
Imagine a borrower who faces a few months of lost income. They request forbearance and stop payments temporarily, avoiding late marks. During the pause, interest keeps accruing, so when payments resume the balance is somewhat higher. It bridged the hardship, but the relief was not free.
Common mistakes
- Assuming interest stops during forbearance, when it usually keeps accruing.
- Using forbearance for a long stretch when another option would cost less.
- Not checking whether unpaid interest gets added to your principal afterward.
- Reaching for forbearance before asking about income-driven repayment plans.
Pro tips
- Ask your servicer whether an income-driven plan would work better than a pause.
- Confirm how interest accrues and whether it will be added to your principal.
- Keep forbearance short, since interest keeps the balance growing meanwhile.
- Pay at least the accruing interest during the pause if you possibly can.
Related Money Dictionary terms
- DefermentA temporary pause on loan payments, often for school or hardship, during which interest may or may not keep building.
- Interest CapitalizationWhen unpaid interest gets added to your loan principal, so future interest is charged on a larger balance.
- Student LoanMoney borrowed to pay for education, offered by the government or private lenders, repaid with interest after school.
- MortgageA long-term loan used to buy a home, secured by the property itself, which the lender can foreclose on if you stop paying.
Frequently asked questions
Does interest keep building during forbearance?
Generally yes. During forbearance, interest usually continues to accrue on your balance even though payments are paused, so you can owe more when payments resume. In some cases that unpaid interest is later added to your principal. Ask your servicer exactly how interest is handled, because the details affect your total cost.
How is forbearance different from deferment?
Both temporarily pause payments, but the key difference is interest. During forbearance, interest generally keeps accruing on all loan types. During deferment, interest may not accrue on certain subsidized federal loans, though it does on unsubsidized and private loans. Which is better depends on your loan type, so confirm with your servicer.
When should I use forbearance?
Forbearance suits a short, temporary hardship when you cannot make payments and other options do not fit. It protects you from missed payments and default. But because interest usually keeps building, it works best as brief relief, not a long-term fix. Ask your servicer whether income-driven repayment might cost you less overall.
Knowing what Forbearance means is knowledge — the first half. A brick gets placed when you act on it: before requesting forbearance, ask your servicer how interest will accrue and whether an income-driven plan fits better.
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Plain-English education — not personalized legal, tax, or investment advice.