Borrower Relief Options

Audience: Support Agents, Sales Teams, Servicing Managers

Topic: Loan Servicing & Borrower Assistance

Overview

In today’s financial environment, flexibility is essential. Borrowers face unexpected life events, job loss, medical emergencies, or temporary cash flow gaps, that can threaten their ability to pay.

PayPlan offers three distinct relief tools: Forbearance, Deferment, and Non-Accrual Periods.

While they all provide "relief," they function very differently. Understanding the distinction is critical to guiding your borrower to the right solution without causing future surprises about their balance.

1. Forbearance (The "Pause Button")

Definition: A temporary suspension of payments due to financial difficulty.

• Key Characteristic: Interest keeps running. The borrower gets a break from paying, but the cost of the loan continues to grow.

How It Works:

• Loans & Credit Lines: Payments stop. No late fees or penalties are charged. However, interest continues to accrue daily. This means the borrower’s total balance will be higher when they resume paying.

• Leases: Payments are simply paused. Since leases generally don't accrue interest in the same way, the term is essentially extended without added cost.

Best For:

Borrowers with a short-term cash flow problem (e.g., "I’m between jobs for 3 weeks") who can handle a slightly higher final payoff amount later.

Scripting for Support:

"Forbearance allows you to pause your payments for now. No late fees will be charged, but interest will continue to add up during this break, so your final balance will be slightly higher when you resume."

2. Deferment (The "Total Freeze")

Definition: A complete stop to all financial obligations for a set period.

• Key Characteristic: Everything freezes. No payments, no interest, no fees. The loan is essentially "asleep."

How It Works:

• All Products: The borrower owes nothing during this period. The balance remains exactly the same on Day 30 as it was on Day 1.

• The Trade-off: This extends the life of the loan by the exact number of months deferred.

Best For:

Borrowers in significant distress (e.g., serious illness or long-term unemployment) where adding more interest debt would be unmanageable.

Scripting for Support:

"Deferment is a complete payment holiday. We will pause your payments and stop all interest and fees. Your balance will stay exactly where it is today until you are ready to restart."

3. Non-Accrual Period (The "Principal-Only" Mode)

Definition: A relief option where the borrower continues to pay, but interest and fees stop accumulating.

• Key Characteristic: Every dollar paid goes 100% toward reducing the balance.

How It Works:

• Loans & Credit Lines: The borrower makes their regular (or modified) payment. PayPlan stops the interest clock.

• Impact: This is the fastest way to get out of debt because the "headwind" of interest is removed.

Best For:

Borrowers who can pay but feel buried by high balances or fees. It’s a great tool for workouts or settlements to help a dedicated borrower get back on track.

Scripting for Support:

"We can set up a Non-Accrual Period. You keep making your monthly payments, but we will stop charging interest. This means every cent you pay goes directly to lowering your debt."

Summary Comparison Table

Key Takeaways for Your Team

• Sales Team: Position these options as proof of your flexibility. "We aren't like a big bank; if life happens, we have tools like Deferment to help you pause without penalty."

• Support Team: Be transparent about Interest Accrual. Never put a customer on Forbearance without explaining that their balance will increase (unless it’s a Lease).