In light of COVID-19, it has become exponentially harder for borrowers to make loan payments in a timely manner. Requests by borrowers for forbearance of loan payments have subsequently risen. Lenders can alleviate the financial burden of borrowers by creating this document to outline terms for a temporary suspension of loan payments.
If you have questions about borrower/lender relations during the COVID-19 pandemic, ask a lawyer or find more resources in our Coronavirus (COVID-19) Legal Center.
Use the Forbearance Agreement document if:
You are a lender whose borrower can't make loan payments
You have been asked by a borrower for a forbearance
You want to set out the terms of the forbearance period
Unlike a loan modification, which is a more permanent solution to unaffordable monthly payments, a Forbearance Agreement provides short-term relief for borrowers. During the forbearance period, the lender agrees to refrain from taking any action designed to demand or collect payment. The forbearance is usually a short period of time. Typically, it is no longer than a year.
Making a Forbearance Agreement can help borrowers and lenders avoid conflicts by outlining clear expectations and guidelines/deadlines for the suspension of payments. This agreement will detail the parties involved, the forbearance period, and the loan principal and APR.
Other names for this document: Loan Forbearance Agreement