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Definition of 'Forbearance'

A forbearance is a temporary delay in making payments on a loan. It is usually granted by a lender when a borrower is experiencing financial hardship and is unable to make their regular payments. Forbearance can be granted for a variety of reasons, such as job loss, medical expenses, or natural disasters.

There are two main types of forbearance: formal and informal. Formal forbearance is arranged between the borrower and the lender, and is usually documented in writing. Informal forbearance is not documented, and is simply an agreement between the borrower and the lender to delay payments.

During a forbearance period, the borrower does not have to make any payments on their loan. However, interest will still accrue on the loan balance. This means that the borrower will owe more money when the forbearance period ends.

Forbearance is a helpful option for borrowers who are experiencing financial hardship. It can help them to avoid defaulting on their loan, and can give them time to get back on their feet financially. However, it is important to note that forbearance can also have some negative consequences. For example, it can damage the borrower's credit score, and it can make it more difficult to get a loan in the future.

If you are considering a forbearance, it is important to speak to your lender first. They can help you to determine if forbearance is the right option for you, and they can help you to understand the potential consequences.

Here are some additional things to keep in mind about forbearance:

* Forbearance is not a free pass. The borrower will still owe the money that they owe, plus interest.
* Forbearance can only be granted for a certain period of time. The length of the forbearance period will vary depending on the lender.
* Forbearance can affect the borrower's credit score.
* Forbearance can make it more difficult to get a loan in the future.

If you are considering a forbearance, it is important to weigh the pros and cons carefully. It is important to remember that forbearance is a temporary solution, and it is important to take steps to get back on your feet financially as soon as possible.

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