Deferment Period
Candlefocus EditorDeferment periods are often found in student loans, automobile loans, and mortgage loans. Depending on the type of loan, interest may still accrue during a deferment period, which means that the interest will be added to the amount due at the end of the deferment period. This means that while the borrower does not have to make payments, the total amount owed may still increase.
Deferment periods can also be found in callable securities. A callable security is an investment instrument issued by a company that can be bought back by the issuer at a predetermined price before the maturity date. A deferment period is the time during which the issuer can buy back the security from the investor.
A deferment period can help a borrower by allowing time to repair their credit or have more money available to make payments at a later date. It also gives lenders assurance that the borrower will pay back the loan in the future. Deferment periods are beneficial for all parties involved and should be explored for each situation.