π Deferred Payment Loan Calculator
The real cost of "no payments for 6 months".
Monthly payment after the deferral ends
Estimates for planning only, not financial advice.
"No payments for 6 months" sounds like a break, but interest usually keeps accruing while you pay nothing. A $25,000 loan at 9.9 percent APR with six deferred months grows to $26,263 before the first payment, lifting the monthly bill from $529.95 to $556.73 and adding $1,607 of total interest. The deferral is not free time; it is interest capitalized into a bigger loan.
How to Use This Calculator
Enter the loan amount, APR, repayment term in months, and the deferral length. The calculator compounds the balance through the skipped months, amortizes the larger balance over the term, and shows what the same loan would have cost with no deferral.
Enter the loan amount and APR exactly as disclosed. Confirm whether interest accrues during the deferral; this calculator assumes it does, which is the common case.
Set the repayment term in months and the number of deferred months before payments begin.
Read the accrued balance, the new payment, and the extra cost versus starting payments immediately.
The Math
The deferral does two things at once: it grows the principal through compounding, and it leaves fewer months of your life for the same debt, since the term usually starts after the deferral. Some lenders instead extend the term by the deferral months, which softens the payment but lengthens the debt. Either way, the interest accrued during the skipped months is real and must be repaid with interest on top.
Worked Example
Borrow $25,000 at 9.9 percent APR for 60 months with the first payment deferred 6 months. The monthly rate is 0.825 percent, so the balance grows to $25,000 x 1.00825^6 = $26,263.31. Amortizing that over 60 months gives $556.73 per month and $8,403.58 of total interest. Without the deferral the payment would be $529.95 with $6,796.81 of interest. The six "free" months cost $1,606.77, about $268 per skipped month.
When Deferral Makes Sense
| Situation | Verdict |
|---|---|
| Temporary income gap, job starting soon | Reasonable, price it first |
| Seasonal business borrowing ahead of revenue | Often the intended use |
| Just to lower the first-year burden | Expensive convenience, usually not worth it |
| Interest truly waived during deferral | Take it, rare and genuinely free |
The Fine Print to Check
Some "deferred" offers accrue interest at a higher penalty rate during the skip period. Others require the accrued interest as a lump sum when payments begin, which can surprise borrowers expecting a smooth start. And a few add the deferral months on top of the term instead of capitalizing interest, which is the cheapest structure. Read the disclosure for which version you are getting, because the same headline offer can cost very different amounts.
Common Mistakes
Assuming deferred means interest-free is the big one; it almost never is. Forgetting that the larger balance also means larger total interest, not just a larger payment, is second. Compare the full picture with our loan amortization calculator for the payment schedule, our APR calculator for the true rate, and our early loan payoff calculator if you plan to kill the deferred loan ahead of schedule.
Deferral vs Forbearance vs Grace Period
Three different features get confused with deferred payments, and they cost very different amounts. A grace period, like a credit card's 21 days, truly charges no interest if you pay in full; it is free. A promotional deferral, like 90-days-same-as-cash, usually accrues interest silently and capitalizes it; it is the $1,607 cost computed above. Forbearance is granted after hardship begins, often with fees and credit-reporting consequences on top of the accrued interest; it is the most expensive of the three.
The marketing rarely distinguishes them. "No payments for six months" can describe a genuine interest-free promo, a standard accruing deferral, or the first phase of a hardship plan, and the total cost ranges from zero to thousands. The disclosure document tells you which one you have: look for the words "interest will continue to accrue" versus "no interest will accrue during the deferral period." One sentence determines whether the offer is a gift or a loan in disguise.
When comparing lenders, normalize every offer to total cost: the sum of all payments plus fees from signing to final payoff. A lender offering a true interest-free deferral at a slightly higher rate can easily beat a lower-rate lender with an accruing deferral. The monthly payment is advertising; the total is the price.
Student Loans: The Original Deferral
Most borrowers meet deferral math first through student loans. Unsubsidized federal loans accrue interest during in-school deferment exactly like the calculator above: the balance grows while payments wait, and the capitalized interest then earns its own interest for years. Subsidized loans are the rare exception where the government pays the interest during deferment, making them genuinely cheaper.
The lesson generalizes. Any deferral where interest accrues is a bigger loan wearing the original loan's clothes, and paying interest during the deferral, even voluntarily, is the highest-return move available. Borrowers who pay the monthly interest while in school graduate owing exactly what they borrowed, while classmates who deferred everything owe thousands more for the same education.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is a deferred payment loan?
A loan whose first payment comes months after funding, such as 90-days-same-as-cash offers. Interest usually accrues during the skipped months and gets added to the balance.
Does interest accrue during the deferral period?
Almost always yes. The lender is still funding your balance, so interest compounds monthly and capitalizes. Truly interest-free deferrals exist but are rare and always advertised explicitly.
How much does a 6-month deferral cost?
On $25,000 at 9.9 percent APR, about $1,607 of extra interest over the loan life, plus a $27 higher monthly payment. The cost scales with rate, balance, and deferral length.
Is "no payments for 90 days" a good deal?
It is fairly priced credit, not a discount. You pay for the skipped months through a larger balance. It makes sense for genuine timing gaps, not as a way to afford more loan.
Do deferred months extend the loan term?
Sometimes. Some lenders add the skipped months to the end; others keep the term fixed and raise the payment. The fixed-term version costs more per month but ends sooner.
What happens if I pay during the deferral anyway?
Voluntary payments during the skip period cut the capitalized interest directly and shrink every later payment. Even one payment in the deferral window meaningfully reduces the cost.
Are deferred payment loans the same as forbearance?
No. Deferral is agreed upfront as a loan feature; forbearance is relief granted later during hardship. Forbearance terms vary widely and deserve their own careful reading.
Can I refinance out of a deferred loan?
Yes, once payments begin and your credit supports it. Refinancing before the capitalized interest compounds further can rescue a pricey deferral.
Do auto dealers offer deferred payments?
Frequently, especially around model-year clearance. Dealer deferrals follow the same math: the balance grows during the skipped months at the contract APR.
How do I compare two deferral offers?
Compare the balance at first payment and the total of all payments, not the monthly payment alone. The offer with the lower total cost wins regardless of how the payments are shaped.