Unlike a loan modification, which is a more permanent solution to unaffordable monthly payments, a Forbearance Agreement provides short-term relief for borrowers. During the forbearance period, the lender agrees to refrain from taking any action designed to demand or collect payment. The forbearance is usually a short period of time. Typically, it is no longer than a year.
Making a Forbearance Agreement can help borrowers and lenders avoid conflicts by outlining clear expectations and guidelines/deadlines for the suspension of payments. This agreement will detail the parties involved, the forbearance period, and the loan principal and APR.
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