Deferment Period

AAA

DEFINITION of 'Deferment Period'

1. A time during which a borrower does not have to pay interest or repay the principal on a loan. Deferment is common with student loans, and may be granted while the student is still in school or just after graduation when the student has few resources to repay the loan. Deferment may also be granted at the lender's discretion during other periods of financial hardship to provide temporary relief from debt payments and an alternative to default.


2. The period after the issue of a callable security during which it cannot be called by the issuer.




INVESTOPEDIA EXPLAINS 'Deferment Period'

1. During a loan's deferment period, interest may or may not accrue. Borrowers should check their loan terms to determine whether a loan deferment means they will owe more interest than if they did not defer the payment. With student loans being federal loans, they do not accrue interest during the deferment period, but private loans typically do.


2. Different types of securities will have a call option allowing the issuer to buy them back at a predetermined price. The issuer cannot call the security back during the deferment period, which is uniformly predetermined by the underwriter and the issuer at the time of issuance.


For example, European options have a deferment period for the life of the option - they can be called only on expiry. Most municipal bonds are callable and have a deferment period of 10 years.

RELATED TERMS
  1. Call Premium

    1. The dollar amount over the par value of a callable fixed-income ...
  2. Callable Bond

    A bond that can be redeemed by the issuer prior to its maturity. ...
  3. Extraordinary Redemption

    A provision that gives a bond issuer the right to call its bonds ...
  4. Forced Conversion

    The occurrence of an issuer of a convertible security exercising ...
  5. Issuer

    A legal entity that develops, registers and sells securities ...
  6. Underwriting

    1. The process by which investment bankers raise investment capital ...
Related Articles
  1. Credit & Loans

    What's the difference between a grace period and a deferment?

    Learn the difference between grace periods and deferments and when each type of delayed-payment period applies to various types of loans.
  2. Callable bonds - because they carry the risk of being cashed in early - often have a higher coupon rate.
    Bonds & Fixed Income

    Bond Call Features: Don't Get Caught Off Guard

    Learn why early redemption occurs and how to avoid potential losses.
  3. Investing Basics

    Callable CDs: Check The Fine Print

    These offer higher returns than regular certificates of deposit, but there's a catch.
  4. Options & Futures

    Callable Bonds: Leading A Double Life

    Find out more about these dangerous and exciting cousins to regular bonds.
  5. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  6. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  7. Options & Futures

    What are the most common momentum oscillators used in options trading?

    Read about some of the most common technical momentum oscillators that options traders use, and learn why momentum is a critical concept for options trading.
  8. Options & Futures

    Writing Covered Calls On ETFs

    The strategy of writing covered calls on ETFs can limit your losses and hedge risk, but they cap your upside potential.
  9. Options & Futures

    How are Bollinger BandsĀ® used in options trading?

    Use Bollinger Bands to identify volatility changes and place options trades at the right time; profit in bull or bear markets using these strategies.
  10. Options & Futures

    Stock Futures vs Stock Options

    A full analysis of when is it better to trade stock futures vs when is it better to trade options on a particular stock. A quick overview of how each of them works and why would a trader, investor, ...

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center