What is Forbearance Letter?

A forbearance letter is a written agreement between a borrower and a lender, in which the lender temporarily allows the borrower to either reduce or suspend their loan payments for a specified period. This arrangement can be beneficial to borrowers who are experiencing financial hardship or unforeseen circumstances, such as job loss, medical emergencies, or natural disasters, which may impact their ability to make timely loan payments.

The forbearance letter typically outlines the terms and conditions of the forbearance agreement, including the duration of the forbearance period, any revised payment terms, and the borrower’s responsibilities once the forbearance period ends. It is important to note that interest usually continues to accrue during the forbearance period, which can increase the overall cost of the loan.