Get a free, no obligation personal loan quote with rates as low as 6.99%
Get Started You can apply with no effect to your credit score

Financial difficulties can sprout up without warning, leaving your finances is disarray. Whether it’s job loss, illness, disability or some other unexpected event, you may opt for a payment deferral to help you through it. 

While these are helpful in cases of emergency, you’ll eventually need to repay the amounts deferred. But how does it work?   

Deferred Payment Meaning

A deferred payment refers to payments you can skip over for a set amount of time. In many cases, this can extend up to half a year. However, the interest keeps accruing on the amount owing during this period. Additionally, though deferrals enable you to skip payments for a time, these amounts remain owing. 

Many mortgages have deferral clauses to prevent issues like defaults. 

But what happens when the deferral ends? How do the payments restart and do payments remain the same? 

Restarting Payments After Deferral

When your deferral arrangements come to a close, it is critical to have a structured approach to paying both your regular payments and the deferred amount. 

While each financial institution and arrangement has different specific terms, most loan types have similar approaches to handling the payments of deferred amounts. 

Repayment Terms For Deferred Payments On Mortgages

Loans for homes have a few different approaches to managing deferrals. Ensure that you follow the terms outlined in your deferral agreement to prevent issues. Generally speaking, the deferred payments will be added to the overall mortgage amount, resulting in a higher amount paid by the time the loan is discharged. This would extend the amortization period of the loan. 

Another scenario includes dividing the deferral amount across the current amortization period. This scenario would increase your regular payment amounts. If you were able to accrue sufficient funds to pay the entire amount owing, ensure that you discuss this before paying the amount to be certain that there are no associated penalties. 

Repayment Terms For Deferred Payments On Loans

Generally, loans are structured similarly to a mortgage. However, depending on the structure of your loan arrangement, you can discuss alternative arrangements with your lending institution. This may include an increased frequency of payments. 

Typically, the unpaid amounts and interest will be distributed across the overall loan, letting you discharge it at the same time while paying higher amounts. If you are unable to pay these amounts, discuss extending the loan term with your lender.

Repayment Terms For Deferred Payments On Credit Cards

With credit card payment deferrals, companies generally waive 50% to 100% of your interest charges for that month. Once the deferral period has ended your minimum payments will be due again and interest charges will resume as normal.  

Repayment Terms For Deferred Utility Bills

The repayment terms for deferred utility bills vary by provider. For example, at ATCO Energy, the deferred amounts will be paid along with your regular monthly payments, for up to 12 months. 

If you want specific details, consult the terms of your arrangement with the utility company itself. 

Preparing To Restart Your Payments

While it might seem overwhelming to approach repaying your deferred amounts on top of your regular payments, there are some simple steps you can take to manage the situation. 

By creating a detailed plan, you can prudently and favourably approach your debt situation. 

Analyze And Adjust Your Budget

A detailed budget is more than just money in and money out. It is a comprehensive plan for how to spend the money you earn. Here are some important points to consider when creating your budget: 

  • Include your job, any side hustles, tips,  investments, and interest accruing on your savings. 
  • Create a complete list of the amounts you owe to all of your loans. Ensure that you factor in the increased payment amounts for any loan deferrals coming to an end. 
  • Assess your monthly spending realistically. 
  • Detail what you spend on food, entertainment, your vehicle, medication, and any other routine expenses you incur.  

Cut Back On Spending

Now that you have an accurate picture of what you earn and spend, you can take a real look at places you can cut costs. Living frugally is a proven approach to tackling built-up debt. Consider places where you can reduce your expenses. 

Perhaps you spend too much on food? Is there a way to streamline your cell phone or internet plan? Maybe your entertainment budget can be reduced. Identify the places where you can spend less and set yourself a maximum spending amount for those areas. 

Coupon AppsLearn More
Price MatchLearn More
DiscountsLearn More

Prioritize High-Cost Debt Repayment

Revolving debt like credit cards tends to have a high rate of interest, particularly when viewed relative to other loans. If you have multiple credit cards, figure out which one is costing more in interest each month. Without neglecting your regular payments on other amounts, focus on paying down the more expensive debt in your name. Because the actual interest amount is relative to the amount owing, ensure that you reassess your math quarterly. Continually pay down the most expensive debt first and you will save in the long run. 

Monitor Your Credit Score

Whether you’ve deferred a payment or not, it’s important to check your credit. Future creditors will look at your credit and so should you. The easiest way to check your credit score in Canada is through a free service. A good option is Loans Canada’s CompareHub.

What If You Can’t Afford To Restart Your Payments?

If you find yourself unable to start back up with your payments, there are some steps you can take. 

  • Reach out to your creditors: In situations where you can partially pay your regular amounts, discuss with your creditors the possibility of an individualized payment arrangement. Especially if you take action early, creditors may be able to make small adjustments to help you maintain regular payments in smaller amounts. 
  • Considering if your car is worth it: If your car loan is creating a struggle financially, consider surrendering it to rid yourself of the loan. If the car is yours free and clear, selling it can provide you with immediate funds to put towards debt. It will also save you on insurance and maintenance costs. 
  • Consumer Proposal: As a matter of last resort, if your debt doesn’t exceed $250,000, consider speaking to a Licensed Insolvency Trustee to discuss the possibility of a consumer proposal. This step, while drastic, can assist with managing large amounts of debt for which there is no other appropriate payment method.

Final Thoughts On Deferred Payments

When it comes to debt, there are always options. Once you gain a thorough understanding of how to manage your post-deferral debt, you can take the necessary steps to protect your finances. By staying organized, crafting a quality budget, and paying the amounts you owe, you can ensure a solid financial future. 

Payment Deferral FAQs

Will deferring a mortgage payment affect my credit score?

If you have an agreement with your lender that allows you to defer a mortgage payment, it should not affect your credit. Your lender should mark your payment as “paid according to agreement”.

Will my lender let me defer a personal loan payment?

Lenders want you to successfully pay back your full loan. If you know you’re going to miss a payment, contact your lender immediately. They should be able to work out a deferral plan that works for you.

Is a deferred payment considered missed or late?

No a deferred loan payment is not considered late or missed. It simply allows you to push pause on your payments for a period of time and protects you from late payment penalties. It does not forgive the debts you owe. You are still obligated to repay the amounts you defer.
Corrina Murdoch avatar on Loans Canada
Corrina Murdoch

Corrina Murdoch has been a dedicated freelance writer and editor for several years. With an academic background in the sciences and a penchant for mathematics, she seeks to provide readers with accurate, reliable information on important topics. Working as a print journalist for several years, Corrina expanded her reach into the digital sphere to help more people gain insight into the realm of finances. When she's not writing, you can find Corrina swimming and spending time with family.

More From This Author

Special Offers

More From Our Experts
Loans Canada places No. 228 on The Globe and Mail’s fifth-annual ranking of Canada’s Top Growing Companies.

By Caitlin Wood, BA
Published on September 29, 2023

Loans Canada is excited to announce it has made it onto the Globe and Mail’s Top Growing Companies list for the second year in a row.
Finder Awards Finalists: Personal Loans Customer Satisfaction Awards 2023

By Priyanka Correia, BComm

Loans Canada is happy to announce it received the finalist award in the Best Personal Loan Search Platform category.
Beware of Fraudulent Lenders Impersonating Loans Canada

By Caitlin Wood, BA

A note to our clients about fraudulent lending practices and illegal upfront fees.
Best Online Savings Account In Canada 2024

By Trevor O'Hagan

Discover the best online savings account in Canada for 2024. Compare top rates, fees, and features to maximize your savings and reach your financial g...
Best TFSA Accounts In Canada 2024

By Lucas Elliott

Explore top TFSA accounts in Canada for 2024. Compare high-interest savings, GICs & investment options for tax-free savings.
Can You Defer Your Mortgage Payment?

By Bryan Daly

A mortgage deferral is a great short-term solution to financial hiccups. Find out everything you need to get a mortgage deferral.
Applying For a Mortgage Outside of Your Home Country

By Lisa Rennie

Purchasing property in a foreigh country is a great way to diversify your assets and allow you to earn rental income.
Affordable Housing Crisis In Canada

By Lisa Rennie

Check out what's affecting the housing market in Canada and learn about the affordable housing crisis in Canada.

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Expert Tips
And Advice

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card