Understanding Loan Forbearance: When to Use It and What to Avoid

13 October 2025

Sometimes life throws curveballs that derail even the best financial plans. Maybe you’ve lost your job, had an unexpected illness, or faced a major car repair. Whatever the reason, keeping up with loan payments can become a real struggle. That’s where loan forbearance comes in—it’s like hitting the “pause” button on your loan payments when things get tight.

But here’s the deal: while forbearance can be a lifesaver, it’s not a “get out of debt free” card. If you don’t fully understand how it works or the potential downsides, it could cost you more in the long run. Let’s break it all down so you can make informed decisions.

What Is Loan Forbearance?

Loan forbearance is a temporary relief option offered by lenders that allows you to pause or reduce your loan payments for a certain period of time. Think of it like putting your loan on a time-out. It’s not forgiveness (where the debt magically disappears), and it’s not a deferment (though they’re similar—more on that later). Forbearance just gives you breathing room to get back on your feet financially.

Most commonly, loan forbearance applies to student loans, mortgages, and occasionally personal loans. Here’s how it works: if you’re experiencing financial hardship, you can request forbearance from your lender. They might agree to reduce your payments or let you skip them altogether for a set period.

Sounds like a godsend, right? Well, hold on a sec—there’s more to it than meets the eye.

Common Reasons to Seek Loan Forbearance

Life happens; we all know that. But what kinds of financial situations might justify asking for forbearance? Here are a few common reasons lenders tend to approve:

- Unemployment or Reduced Income: Lost your job? Had your hours cut? Forbearance can give you some financial wiggle room while you get back on track.
- Medical Emergencies: Hospital bills piling up? Health-related challenges can wipe out your savings fast. Forbearance can help you avoid defaulting on your loan during recovery.
- Natural Disasters: If a hurricane, wildfire, or flood destroyed your property or impacted your income, lenders often grant forbearance as part of disaster relief.
- Temporary Financial Hardship: Whether it’s a divorce, a family emergency, or another unforeseen expense, sometimes you just need a short-term break.

Let’s be honest—no one loves asking their lender for help. But hey, lenders don’t want you to default either. Forbearance can be a win-win if you approach it wisely.

Types of Loans That Offer Forbearance

Not every loan offers a forbearance option, but many do. Here’s a quick breakdown by loan type:

1. Student Loans

Student loan forbearance is pretty common, especially if you have federal loans. The U.S. Department of Education offers two types of forbearance:
- General Forbearance: For temporary financial struggles like unemployment or medical expenses.
- Mandatory Forbearance: If you meet specific criteria (e.g., serving in AmeriCorps, working in a medical internship, etc.), your lender must grant forbearance.

Just remember: with most student loans, interest keeps accruing during forbearance. That means your balance will grow even if you’re not making payments. Ouch.

2. Mortgages

Many mortgage lenders offer forbearance, especially during widespread economic challenges (like a recession or pandemic). Mortgage forbearance became a hot topic during COVID-19 when millions of homeowners needed help staying afloat.

During mortgage forbearance, you’ll pause or reduce payments, but you’ll eventually have to make them up. Some lenders let you tack missed payments onto the end of your loan, while others require lump-sum repayment.

3. Personal Loans

Forbearance on personal loans isn’t as common as with mortgages or student loans, but some lenders offer it. If you’re struggling to pay a personal loan, it’s worth asking your lender about forbearance or alternative arrangements.

Pros and Cons of Loan Forbearance

Forbearance has its benefits, but it’s not a silver bullet (sorry to burst your bubble). Here’s a closer look at the pros and cons.

Pros

1. Temporary Relief: Let’s face it—sometimes you just need a break. Forbearance can stop the stress spiral and give you time to regroup.
2. Avoid Default: Defaulting on a loan can wreck your credit and lead to serious legal or financial consequences. Forbearance helps you avoid that nightmare.
3. Retain Access to Credit: Keeping your account in good standing ensures you won’t burn bridges with your lender or cut off future borrowing options.

Cons

1. Interest Accrual: In most cases, interest keeps racking up during forbearance. It's like taking a timeout but still accumulating penalties on the scoreboard.
2. Long-Term Cost: Because of accrued interest, you could end up paying more over the life of the loan.
3. Temporary Solution: Forbearance is just a short-term fix—it doesn’t address the root cause of your financial difficulties.

When Should You Use Loan Forbearance?

Alright, so now you know the basics. The burning question: When is forbearance actually the right move? Here’s a cheat sheet:

1. You’re in Temporary Trouble: Forbearance works best for short-term financial hiccups, not long-term struggles. Don’t use it if you’re drowning in debt with no relief in sight.
2. You Have No Other Options: Exhaust other alternatives first. Can you dip into savings? Trim unnecessary expenses? Pick up a side hustle? Forbearance should be Plan B (or C).
3. Your Lender Offers Flexible Terms: Some lenders are more lenient than others. If your lender offers reasonable repayment terms after forbearance, it may be worth considering.

What to Avoid When Considering Forbearance

Okay, let’s get real for a sec—there are some definite don’ts when it comes to forbearance. If you’re not careful, you could make your financial situation worse. Here’s what to avoid:

1. Ignoring the Fine Print

Lenders don’t hand out forbearance just because they’re nice. There are rules, requirements, and conditions. Read the terms carefully—especially when it comes to how missed payments will be handled.

2. Procrastinating Repayment

Forbearance isn’t a free pass to ignore your loan forever. Make a plan for how you’ll catch up once the forbearance period ends. Procrastinating repayment can lead to bigger problems down the road.

3. Relying on Forbearance Repeatedly

Using forbearance too often is like putting Band-Aids on a broken pipe. If you find yourself needing frequent relief, it’s time to reassess your budget and find more sustainable solutions.

4. Overlooking Interest Accrual

Interest doesn’t take a vacation during forbearance. If you can, try to make interest-only payments to minimize the long-term cost.

How to Request Loan Forbearance

Ready to take the plunge? Here’s how to go about requesting forbearance:

1. Contact Your Lender: Don’t be shy—reach out to your lender directly and explain your situation.
2. Provide Documentation: Be prepared to show proof of your financial hardship. This could include pay stubs, medical bills, or unemployment statements.
3. Understand the Terms: Ask plenty of questions and make sure you fully understand the repayment terms before agreeing to forbearance.
4. Get It in Writing: Always get the agreement in writing to avoid any misunderstandings later.

Alternatives to Forbearance

If you’re not sold on forbearance, don’t worry—there are other options. Here are a few alternatives to consider:

- Loan Deferment: Similar to forbearance, but typically doesn’t accrue interest (depending on the loan type).
- Loan Modification: Negotiate with your lender to adjust the loan terms, such as lowering your interest rate or extending the repayment period.
- Debt Consolidation: Combine multiple debts into one loan with a lower interest rate.
- Refinancing: Replace your current loan with a new one that offers better terms.

Final Thoughts

Loan forbearance can be a game-changer when life throws you a financial curveball, but it’s not a decision to take lightly. Sure, it buys you time, but it comes with strings attached—like added interest and long-term costs. Use it wisely, and always have a plan for what comes next. Remember, forbearance is a temporary fix, not a permanent solution.

If you’re considering forbearance, make sure you fully understand the terms, weigh the pros and cons, and explore alternatives. Financial freedom is still the goal, even when the road gets bumpy.