Introduction
Interest-Only Deferred repayment allows borrowers to postpone interest payments at the start of a loan. This feature can be useful for bridge loans, phased projects, or cases where borrowers need an initial grace period. Once the deferment ends, accrued interest is due based on the loan agreement.
Navigating to This Section
Click the Gear icon in the top-right corner to open Settings.
Select Company Settings.
Use the left-hand navigation menu to expand Loan Setup/Origination.
Locate Repayment Methods.
Tip: If you cannot access this section, ensure you have the necessary permissions or contact your administrator.
Interest Only Deferred
When enabled, this setting creates a repayment structure where no interest payments are collected during the deferment period. Instead, interest accrues and is either added to the loan balance or paid in a lump sum later.
Key Considerations:
Borrowers do not make monthly interest payments during the deferment period.
Accrued interest is due at a future date, impacting total repayment amounts.
Lenders must confirm the deferral structure in loan documentation before funding.
Best Practice: Enable this setting only if it aligns with your lending practices to ensure streamlined loan servicing and accurate loan documentation.
FAQs
When should I enable Interest-Only Deferred repayment?
Use this option when borrowers require short-term relief from interest payments, such as bridge loans or phased funding projects.
Does deferred interest get capitalized into the loan balance?
Yes, depending on your settings. Interest can either be added to the loan principal or paid as a lump sum at the end of the deferment period.
Can I modify deferment settings after loan origination?
No, changes to deferment periods must be finalized before loan funding to ensure accurate repayment schedules.
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