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Whether it’s a medical emergency, a car repair, a job loss, or any other large unexpected expense, Canadians often turn to personal loans during difficult times.

But what happens when a difficult time lasts longer than expected and you can’t make your loan payment?

Fortunately, there are a few ways you can defer your loan payment, so you can temporarily relieve some of your financial burdens and get your finances back on track.

What Is A Loan Payment Deferral

When you defer a payment, you make an agreement with your lender that you will not make any payments for a specific period of time. However, that does not mean that these payments are cancelled, they are simply being pushed back. Meaning you’ll still have to make those payments later. Depending on your agreement with your lender, interest may accrue on your outstanding balance during the deferral period. This in turn will increase the amount you originally set out to pay.

Loan Payment Deferrals And Credit Scores

A deferral is something both you and your lender agreed upon, as such, your payment is not seen as missed or late. Missed and late payments can negatively impact your credit score, but a deferral is not reported to the credit bureaus. However, do make sure to check your credit score, as late and missed payments are reported electronically. As such, if your lender does not make the proper adjustments. It may register your deferral as a late or missed payment. By monitoring your credit, you can correct any errors on your report and make arrangements with your lender so it doesn’t happen again.

How Do You Apply For A Loan Payment Deferral? 

In most cases, there’s no form or portal to request a payment deferral. Most lenders provide deferrals based on your unique financial situation. To request a deferral, you must speak to your lender by calling or making an in-person appointment with them. Many lenders are willing to work with their clients by offering adjustments to their current loans. Such as lower payments, lower interest rates, or even deferrals. The reason is, your lender would much prefer you to pay them something rather than nothing.

Read The Fine Print

If you only need a one-month payment deferral, do check your contract. Oftentimes, there will be a skip payment clause. However, it is important to read the fine print as it may come with fees. Be sure to contact your lender and inform them of your decision to use the “skip a payment” option. Verify that it won’t be reported to the credit bureaus as a late or missed payment.

Alternatives To Deferring Your Loan Payment 

Pay Late

Though it is important to make your loan payments on time, sometimes paying slightly late or within 30 days before the next due date can be a way to “defer” your payment. Of course, you would be charged interest and perhaps even a late penalty fee, but depending on why you need to defer the payment, it may be worth the extra charges. Moreover, most lenders won’t report the late payment to the credit bureaus unless it’s 30 days past its due date. This option should be used by those who need a couple of extra weeks to get their finances in order. Those who require more should consider refinancing.


If you can’t defer your loan payments, refinancing can be a good solution. A new loan can lead to a lower interest rate and longer repayment terms, which will lead to smaller more manageable payments. However, despite the lower payments and interest, you are likely to pay more on interest overall. 

When applying for a new loan, be sure to apply before you default on your current loan as a default can ruin your chances of qualifying for a new loan. Most lenders will be unwilling to lend to someone who is already behind on payments and those who are willing may charge higher rates.

Borrow Money From A Friend Or Family Member

It can be hard asking for money from your friends or family, but they can often be a safe and reliable form of financial support. Simply explaining your situation is usually enough for a friend or family member to extend a helping hand. You can even opt to create a contract with details of the money borrowed, so it feels more like a transaction. 

Which Banks Are Currently Offering Loans Deferrals Amid COVID-19

Amid COVID-19, many of Canada’s major banks are offering deferrals for loan payments, mortgage payments, credit card payments and more. Depending on your financial situation, you may qualify for 1 to 6 months of payment deferrals. Due to these exceptional circumstances and the sheer volume of people affected by COVID-19, you can request for a payment deferral by applying online with your bank.

Speak To A Credit Counsellor

If none of the options above is enough to get you back on track with your financial obligations, you may want to consider speaking to a credit counsellor. A credit counsellor will review your finances and come up with a solution that will help you get out of debt such as a debt consolidation program, a consumer proposal or even bankruptcy.

Priyanka Correia, BComm avatar on Loans Canada
Priyanka Correia, BComm

Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.

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