Forbearance vs. Deferment: Which Is Better for Credit Protection?
When you’re struggling to make loan payments whether it’s student loans, a mortgage, or personal debt forbearance and deferment are two options that can offer temporary relief. But while both can pause your payments, they have very different long-term consequences, especially when it comes to your credit score.
In this guide, we’ll break down how forbearance and deferment work across different loan types, how they impact your credit, and which one is better for protecting your financial health.
What’s the Difference Between Forbearance and Deferment?
At their core, both options allow you to pause or reduce loan payments temporarily, but the key distinctions are:
| Feature | Forbearance | Deferment |
|---|---|---|
| Interest accrues? | Usually, yes | Sometimes no (depends on loan type) |
| Credit impact | Neutral if reported correctly, riskier if extended | Typically safer for credit |
| Eligibility | More flexible | Often requires specific criteria |
| Common for | Mortgages, student loans, personal loans | Student loans, occasionally mortgages |
| Duration | Short-term (3–12 months) | Can be longer, depending on reason |
Student Loans: Forbearance vs. Deferment
Deferment is generally the better option for federal student loans, especially subsidized loans where interest doesn’t accrue during the deferment period.
Use deferment if:
- You’re in school, on active military duty, or unemployed
- You qualify for an economic hardship deferment
- You want to avoid growing your balance with interest
Forbearance, on the other hand, is easier to qualify for but less generous. All loans subsidized or not will accrue interest, making your loan balance grow over time.
Use forbearance if:
- You don’t qualify for deferment
- Your hardship is short-term (e.g., medical issue, temporary job loss)
Credit Impact:
As long as you’re approved and in good standing, neither forbearance nor deferment will directly lower your credit score. They’re reported as current (not late), but missed payments before approval can still hurt your score.
Mortgages: Forbearance Is More Common
Deferment isn’t usually offered for mortgages. During the COVID-19 pandemic, many homeowners were granted forbearance, allowing them to pause payments for several months.
Mortgage forbearance:
- Pauses payments for a defined period (3, 6, or 12 months)
- Interest may still accrue
- You may owe a lump sum or resume regular payments after the pause
Credit Impact:
- If you enter forbearance with lender approval, it won’t hurt your credit
- If you miss payments before entering forbearance, those late marks can remain
- Forbearance may be noted on your credit file but won’t reduce your score directly
Always confirm with your lender that they are reporting your forbearance as current — not delinquent.
Personal Loans: Riskier with Forbearance
Most personal loan lenders may offer forbearance but rarely offer deferment. This means:
- Interest typically continues to build
- Forbearance terms vary widely by lender
- If you’re in default before requesting forbearance, damage may already be done
Unlike student loans, there are no federal protections for personal loan forbearance, so your credit score may still be at risk depending on how your lender reports it.
Which Is Better for Credit Protection?
| Scenario | Better Option |
|---|---|
| Federal student loans (subsidized) | Deferment |
| Private student loans | Case-by-case (some offer deferment) |
| Mortgage payments | Forbearance (usually only option) |
| Personal loans | Forbearance, but only if lender confirms neutral reporting |
| You can still make partial payments | Forbearance with a structured repayment plan |
Deferment usually wins for credit safety:
It’s often tied to specific circumstances (like school enrollment), and interest may not accrue, especially with subsidized loans. Less interest = less debt = less credit risk.
Forbearance can protect your credit too — if managed carefully:
If your lender agrees to forbearance and reports you as current, your score stays safe. But if you miss payments before approval or break terms, your credit can take a hit.
Final Tips
- Always get written confirmation from your lender on how they’ll report your account
- Don’t wait until you’ve already missed payments apply early
- Review your credit reports monthly to ensure correct reporting
- Ask your lender about post-forbearance repayment options (some may expect a lump sum)
Final Word
When used correctly, both deferment and forbearance are powerful tools to help you stay afloat without sinking your credit score. But deferment generally comes with fewer risks and less interest accumulation — especially for federal student loans.
If you’re overwhelmed by multiple debts and considering other options, it’s important to understand how those solutions stack up.
Next up: Does Debt Settlement Destroy Your Credit? a look at what happens when you settle your debts for less than you owe, and whether it’s worth the credit hit. read: Does Debt Settlement Destroy Your Credit?
