Understanding Deferrals
Business term loan deferrals
How does a business term loan deferral work? How does it affect repayment? Here’s what to consider before deferring your business term loan.
How does the deferral work?
The principal portion of payments are suspended for a defined period of time, but interest payments continue to be charged and are due and payable in accordance with the terms of your loan. The amortization period of your loan is extended by the same number of months as your deferral period.
If you have life and/or disability insurance on your loan, those premiums will continue to be debited from your account to maintain your coverage.
How does repayment work?
When your loan payments of both principal and interest resume after the end of the deferral period, your payment amounts will remain the same until the last payment of your loan. The last payment of your loan will be larger than the others. This increase is a result of the deferred payments, as you will not have paid all the principal and interest owing by the end of the amortization period of your loan.
What should you consider?
Deferring payments may significantly increase your interest costs over the life of your loan, so it's important to evaluate your financial situation and priorities before exercising this option. Please connect with us about the possible impacts of deferring your loan payments.
Repayment strategies
If you’re concerned about not having sufficient funds available when your payments resume, please connect with us prior to the end of the deferral period to explore more manageable options. Likewise, if you’d like to repay deferred payments early, please connect with us.
Helpful definitions
Amortization period: The total number of years that it’ll take to pay off your loan
Debit: To take out of your account
Deferral period: The defined period of time that your payments are suspended
Interest: The charges that accrue (or accumulate) over time, which are determined by applying the rate to an amount owing from time to time under a loan, line of credit or lease agreement
Outstanding principal balance: The current amount owing on your principal balance
Payment account: The account you designated, from which your payments are withdrawn
Principal balance: The original amount of money you borrowed
Rate: The interest rate you pay under your loan, line of credit, lease, or cardholder agreement
Secured: When you use an asset, such as your home, as collateral to secure the loan
Term: The length of time you’re committed to in the conditions set out in the loan agreement or lease agreement, such as your interest rate and payment amount
Need help?
Our Client Care team will be happy to assist.