An Interim Loan Repayment Agreement offers borrowers a short-term reprieve from standard loan payments when facing unexpected financial challenges such as job loss, medical emergencies, or temporary income drops. Unlike permanent loan modifications or refinancing, it is a temporary pause or adjustment allowing reduced payments, interest-only payments, or forbearance typically lasting between three to nine months.
To initiate this agreement, borrowers should contact their lender promptly, providing documentation of financial hardship like pay stubs or medical bills. The lender assesses the situation and, if approved, proposes temporary terms that alleviate immediate payment pressure without permanently altering the original loan.
Common forms of interim relief include temporarily reduced monthly payments, interest-only payments, or a full payment pause (forbearance). The borrower should clearly understand how deferred payments are handled — whether added to the loan balance, paid as a lump sum later, or accrued with interest — as this affects the total loan cost.
While this agreement protects your credit by preventing defaults and foreclosures during the interim period, interest typically continues to accumulate, potentially increasing the overall amount owed. It also provides critical breathing room to stabilize finances or secure more permanent solutions such as a loan modification or refinancing.
Unlike permanent modifications that permanently change loan terms, an interim agreement is a temporary measure and requires a clear exit strategy. As the interim period ends, you may resume original payments, transition to a permanent plan, or settle deferred payments.
Key factors to review before signing include the agreement duration, new payment amounts, interest accrual, handling of deferred sums, fees, credit reporting effects, and written terms. Getting the agreement in writing protects you by clearly defining your rights and obligations.
Interim agreements are typically granted only when lenders confirm your hardship is temporary and you are working toward a long-term resolution. They are not guaranteed, but they help you avoid loan default or foreclosure during challenging times.
For more information on permanent loan solutions, see our glossary on Loan Modification and understand the role of Forbearance Agreements in loan relief.
Sources:
- Consumer Financial Protection Bureau, Understanding Loan Modification Options, https://www.consumerfinance.gov/
- Investopedia, What Is Forbearance?, https://www.investopedia.com/terms/f/forbearance.asp
- FinHelp Glossary: Mortgage Loan Modification, Forbearance Agreement