Deferment Period

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.




BREAKING DOWN '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. Issuer

    A legal entity that develops, registers and sells securities ...
  2. Forced Conversion

    The occurrence of an issuer of a convertible security exercising ...
  3. Callable Bond

    A bond that can be redeemed by the issuer prior to its maturity. ...
  4. Call Premium

    1. The dollar amount over the par value of a callable fixed-income ...
  5. Extraordinary Redemption

    A provision that gives a bond issuer the right to call its bonds ...
  6. Underwriting

    1. The process by which investment bankers raise investment capital ...
Related Articles
  1. Bonds & Fixed Income

    Bond Call Features: Don't Get Caught Off Guard

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

    Callable CDs: Check The Fine Print

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

    Callable Bonds: Leading A Double Life

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

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  5. 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.
  6. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  7. Mutual Funds & ETFs

    5 Vanguard Fixed Income Fund Underperformers

    Learn about three Vanguard fixed income mutual funds that underperform compared to their benchmark indexes. Find out why low expense ratios are important.
  8. Mutual Funds & ETFs

    Top 3 Allianz Funds for Retirement Diversification in 2016

    Discover the top three Allianz funds for retirement diversification in 2016, with a summary of the portfolio's managers, performance and risk measures.
  9. Mutual Funds & ETFs

    3 PIMCO Funds Rated 5 Stars by Morningstar

    Learn about three fixed income mutual funds managed by Pacific Investment Management Company (PIMCO) that have received five-star overall ratings from Morningstar.
  10. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
RELATED FAQS
  1. What's the difference between a grace period and a deferment?

    The major difference between a grace period and a deferment is when a borrower qualifies for each delayed payment option ... Read Full Answer >>
  2. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  3. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  4. What are the maximum Social Security disability benefits?

    The average Social Security disability benefit amount for a recipient of Social Security Disability Insurance (SSDI) in 2 ... Read Full Answer >>
  5. How do I calculate the future value of an annuity?

    When planning for retirement, it is important to have a good idea of how much income you can rely on each year. There are ... Read Full Answer >>
  6. Have hedge funds eroded market opportunities?

    Hedge funds have not eroded market opportunities for longer-term investors. Many investors incorrectly assume they cannot ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  6. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
Trading Center