Deferred Payment Calculator
Calculate loan payments where interest is deferred (added to the principal) during a specified period. This calculator helps you understand how interest deferral affects your total loan cost and monthly payment amounts.
Period when interest is deferred
Total length of the loan
Payment Summary
Deferral Period:
0 months
Regular Payments:
0 months
Total Term:
0 months
Cost Comparison
Deferred Interest:
$0.00
Total Interest Paid:
$0.00
Total Amount Paid:
$0.00
Monthly Payments
Deferral Period:
$0.00
Regular Period:
$0.00
Final Balloon Payment:
$0.00
Understanding Deferred Payment Loans
A deferred payment loan allows you to postpone making payments for a specified period, typically 3-12 months. During the deferral period, interest continues to accrue but is added to the loan balance rather than being paid monthly. This can provide short-term relief but increases your total loan cost.
How Deferred Payments Work
Deferral Period
- No monthly payments required
- Interest accrues daily
- Interest is capitalized (added to principal)
- Loan balance increases
Regular Payment Period
- Monthly payments resume
- Payments based on new higher balance
- Interest calculated on capitalized amount
- May include balloon payment
Advantages
- Short-term cash flow relief
- Lower initial monthly payments
- Flexibility during financial hardship
- Time to improve financial situation
Disadvantages
- Higher total interest cost
- Increased loan balance
- Potential for larger payments later
- Can lead to debt cycle
Types of Deferred Payment Loans
| Loan Type | Typical Deferral | Common Uses | Risks |
|---|---|---|---|
| Student Loans | 6-12 months | After graduation | Interest capitalization |
| Mortgage Loans | 3-6 months | Construction loans | Higher rates |
| Business Loans | 3-12 months | Startup financing | SBA restrictions |
| Personal Loans | 1-6 months | Emergency situations | High interest rates |
Deferred vs Regular Payments
Cost Comparison Example
Regular Loan ($10,000 at 8.5% for 60 months)
- Monthly payment: $202.76
- Total interest: $2,165.60
- Total paid: $12,165.60
- No deferral period
Deferred Loan (6-month deferral)
- Deferral period: $0 payments
- Regular payments: $212.84
- Total interest: $2,270.40
- Total paid: $12,270.40
- Extra cost: $104.80
When to Consider Deferred Payments
Good Situations:
- Temporary financial hardship
- Waiting for income increase
- Student loan grace period
- Business startup phase
Poor Situations:
- Long-term financial problems
- High-interest consumer debt
- When you can afford regular payments
- Without a repayment plan
Alternatives to Deferred Payments
Refinancing:
- Lower interest rate
- Extended term
- Reduced monthly payments
- Requires good credit
Debt Consolidation:
- Combine multiple debts
- Single monthly payment
- Potentially lower rate
- Simplified management
Hardship Programs:
- Temporary payment reduction
- Loan forbearance
- Government assistance
- Credit union programs
Budget Adjustment:
- Cut unnecessary expenses
- Increase income sources
- Sell assets if needed
- Create emergency fund
Key Takeaways for Deferred Payments
- Deferred payments provide short-term relief but increase total loan costs
- Interest continues to accrue during the deferral period
- Deferred interest is capitalized, increasing your loan balance
- Use deferral only when necessary and have a repayment plan
- Compare deferred loan costs with alternatives like refinancing
- Student loans and some business loans offer deferral options
- Consider the long-term impact on your debt load
- Deferred payments are not free money - you'll pay more overall