Forbearance has two primary meanings depending on the context:
General Meaning
Forbearance means the quality of being patient, self-controlled, and able to forgive or restrain oneself in difficult situations. It involves refraining from doing something, exercising patience and tolerance
Financial/Legal Meaning
In finance and law, forbearance refers to a temporary postponement or delay in enforcing a right or obligation, especially related to loan repayments. It is an agreement between a lender and borrower where the lender agrees to temporarily suspend or reduce loan payments to help the borrower avoid default or foreclosure. The borrower still owes the full amount and must repay missed payments later, often with accrued interest. Forbearance is typically granted for financial hardship situations such as illness, job loss, or natural disasters
Examples of Forbearance:
- Mortgage forbearance: The lender delays foreclosure and allows temporary reduced or paused payments
- Student loan forbearance: Temporary postponement or reduction of student loan payments during financial difficulty, with interest still accruing
Important Notes:
- Forbearance does not erase the debt; missed payments and interest must be repaid later
- It is a negotiated agreement and may include various terms such as partial payments or interest-only payments during the forbearance period
- Forbearance provides temporary relief but is not a long-term solution if the borrower cannot resume payments afterward
In summary, forbearance means patient self-restraint or, in financial terms, a temporary, negotiated delay in loan payments to help borrowers manage short- term financial difficulties
