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What Consideration Is Given for a Forebearance Agreement?

    Forbearance Function

    • Forbearance is essentially stopping the payments on the loan for a certain period. The lender puts the payments on hold so the borrower can catch up on the past-due payments.

    Forbearance Eligibility

    • To be eligible for a forbearance, you must have a reason for being past due on the payments. Disability, unemployment and death of head of household are just some of those reasons.

    Interest Consideration

    • One consideration for forbearance is interest accrual. During a forbearance, the payments are put on hold, but the interest still accrues. The borrower will ultimately pay the same amount of interest on the loan as he would if the payments continued.

    Cost Consideration

    • By allowing the borrower to take time and mend his financial situation, the lender is avoiding the costs of foreclosure or default on the loan.

    Time Frame

    • Forbearance are usually granted for up to one year's time. It can be renewable, especially in the case of student loans.

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