Deferred Payment Loan
When you delay the first payment on a loan, interest keeps accruing and is added to your balance. See how a deferral period raises your payment and total cost.
A worked example
Running this tool on current national benchmarks (Federal Reserve / Freddie Mac via FRED (St. Louis Fed)) — swap in your own numbers to see how the result moves.
- Solve for
- Monthly payment
- Loan amount
- $20,000
- Interest rate
- 8%
- Repayment term (years)
- 5
- Deferral period (months)
- 12
vs $405.53 with no deferral
- Loan amount$20,000
- Balance after deferral$21,660
- Monthly payment$439.19
How the payment after deferral changes with loan amount
Holding the other inputs at the example above, here is how the result moves as loan amount changes.
| Loan amount | Payment after deferral | Loan amount |
|---|---|---|
| $10,000 | $219.59 | $10,000 |
| $20,000 | $439.19 | $20,000 |
| $40,000 | $878.37 | $40,000 |
| $80,000 | $1,756.75 | $80,000 |
The math behind it
During the deferral period you make no payments, but interest still accrues and capitalizes — it is added to the balance. The calculator grows the loan by compounding it monthly across the deferral months, then amortizes that larger balance over your repayment term. So the payment and total cost are based on the grown balance, not the original amount. You can solve for the payment on a given amount, or the amount a given payment supports; the difference between the grown and original balance is the interest the deferral cost you.
Assumptions & limits
- No payments are made during deferral, so interest compounds monthly and is added to principal.
- Repayment is a standard fixed-rate amortization of the grown balance over the term you choose.
- The same interest rate applies during deferral and repayment.
- The cost of deferring is the total interest that capitalized before repayment began, which raises every later payment.
Common questions
Why does deferring payments raise both my payment and total cost?
Deferral does not pause interest — it only pauses payments. Interest keeps accruing and is added to your balance, so when repayment starts you are amortizing a larger amount. That larger balance produces a higher monthly payment and more total interest than if you had never deferred.
What does it mean for interest to capitalize?
Capitalizing means unpaid interest is folded into your principal balance. From that point you pay interest on the interest. The calculator shows how much interest capitalizes during the deferral period — that amount becomes part of the loan you repay.
Is deferring a loan ever worth it?
It can be, when you genuinely cannot make payments now and the alternative is default. But deferral is rarely free — the capitalized interest is a real added cost. If you can make even interest-only payments during the deferral window, you avoid the compounding shown here.