forbearance
A temporary postponement or reduction of loan payments granted by a lender, typically due to financial hardship. Interest may still accrue during the period.
Example
“During COVID-19, millions of homeowners requested mortgage forbearance, pausing payments for up to 18 months.”
Memory Tip
FORBEARANCE = the lender is BEARING (tolerating) your temporary inability to pay.
Why It Matters
Forbearance can be a lifeline during temporary financial hardship, allowing you to avoid defaulting on your loans and damaging your credit score. Understanding this option helps you know what alternatives exist if you face job loss, medical emergencies, or other unexpected financial challenges.
Common Misconception
Many people believe that forbearance means the debt disappears or that they do not have to pay interest during the postponement period. In reality, interest typically continues to accumulate, meaning you will owe more money when payments resume, making forbearance a temporary relief rather than debt forgiveness.
In Practice
If you have a $200,000 mortgage with a $1,200 monthly payment and lose your job, your lender might grant a 6-month forbearance. During those 6 months you make no payments, but your interest still accrues, adding roughly $7,200 to your loan balance. When forbearance ends, you must resume payments or work out a plan to catch up on the missed amount.
Etymology
From Old English 'forberan' (to endure, hold back from) — the lender BEARS with the borrower temporarily.
Common Misspellings
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See Also
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