THE BROKEN WALLET

*Disclosure: This page may contain affiliate links. We receive a small commission if you purchase something we recommend (at no cost to you). All opinions remain our own.

Will Banks Let You Skip a Payment? 

Ever had a month where you could really use a financial breather?

Life happens—unexpected expenses, job changes, or health issues can throw even the best-budgeted plans into chaos. Sometimes, skipping a payment might seem like the ideal option. But do banks actually allow you to do this, and if so, is it a good idea?

Here’s a breakdown of how skipping a payment works, what types of loans allow it, and what you should consider before taking this option.

What Does It Mean to Skip a Payment?

When you skip a payment, you’re not actually getting out of paying that month’s bill. Instead, many lenders offer options to delay or defer a payment temporarily, giving you a month off and moving that payment to the end of your loan term. For people who need some financial relief, skipping a payment can feel like a much-needed lifeline.

This is generally a straightforward process with certain types of loans, especially with car loans, where lenders are more likely to offer this flexibility. For example, some auto finance companies allow borrowers to skip a payment up to three times during the loan term. If approved, you won’t face a penalty or see a hit on your credit score, which is a relief for keeping your credit intact.

Types of Loans That Might Allow Skipping Payments

• Car Loans: These are often the easiest for skipping payments since lenders frequently offer this option to minimize repossessions.
• Personal Loans: Some personal loan providers offer similar programs, though they may have specific qualifications and terms.

Pros of Skipping a Payment

• Immediate Relief: You get to free up funds for the month.
• No Penalty: If approved, skipping a payment won’t incur late fees or penalties.
• No Credit Impact: It won’t negatively affect your credit score since the lender has agreed to defer the payment.

Cons of Skipping a Payment

• Accrued Interest: Interest often continues to build, meaning your total loan cost could be higher by the time it’s paid off.
• Extended Loan Term: By moving the payment to the end of your term, you’re committing to one more month of payments down the line.
• Eligibility Criteria: Not everyone will qualify, and some lenders may limit how often you can request this.

Skipping a Mortgage Payment

Skipping a mortgage payment is possible, but it’s not quite as simple as it might be for an auto loan. Mortgage lenders may allow you to defer or postpone payments under certain circumstances, often through a process known as forbearance or, in some cases, deferral. Each option has distinct features and may impact your mortgage differently.

1. Forbearance: Forbearance is a temporary pause or reduction in your mortgage payments due to financial hardship, such as job loss, medical expenses, or natural disaster impacts. During forbearance, the lender allows you to skip payments for a set period (usually three to six months, though extensions may be possible). However, interest still accrues during this period, meaning your loan balance grows.

• How Repayment Works After Forbearance: At the end of the forbearance period, the skipped payments typically become due. Lenders may offer several options, including:
  • • Lump-Sum Payment: Paying back all missed payments in one large payment, which can be challenging for many borrowers.
    • Repayment Plan: Adding a portion of the missed payments to your future monthly payments over a set number of months.
    • Loan Modification: Changing the terms of the loan, like extending the loan term to reduce monthly payments.

2. Deferment: Mortgage deferment is slightly different from forbearance and may not be offered by all lenders. With deferment, the missed payments are often added to the end of the loan term, effectively extending the mortgage by the number of skipped payments without immediate repayment. For example, if you defer three payments, your loan term may be extended by three months.

**To qualify for either forbearance or deferment, you’ll usually need to show that your financial hardship is significant and, in some cases, temporary. This may involve submitting proof of income, expenses, and a statement explaining your financial difficulties.

Federal Loan Options: Forbearance vs. Deferment

For federal loans, forbearance and deferment are the main relief options. Here’s how they compare:

• Forbearance: Temporary pause on payments, usually for reasons like financial hardship. Interest accrues during forbearance, so you may end up paying more in the long run.
  • Good for: People with short-term financial difficulties who plan to resume payments soon.
  • Pros: Quick relief, temporary pause on payments.
  • Cons: Interest still accrues, increasing the total cost.
• Deferment: Suspends payments for eligible reasons, such as returning to school or experiencing financial hardship. Interest on subsidized loans doesn’t accrue during deferment, so you’re not adding to the overall cost.
  • Good for: Those with specific qualifying situations like school enrollment or unemployment.
  • Pros: Pauses payments without accruing interest on certain loans.
  • Cons: Not available to everyone, and unsubsidized loans will still accrue interest.