How Deferrals, Missed Payments, and Extra Payments Affect Interest on Your Loan

The way you manage your loan payments can impact how much interest you end up paying over time. Whether you defer a payment, miss one, or make extra payments, each of these actions changes your principal loan balance and affects the interest that accrues daily.

Deferrals

A deferral lets you move a scheduled payment to a later date. While this can offer short-term relief, it increases the amount of interest you pay overall.

• Interest continues to accrue during the deferral period.
• Your principal balance remains the same while the payment is deferred, which means interest is still being calculated on the full principal amount.
• The deferred payment is moved to the end of your loan term, and the loan is extended by one month.

Missed Payments

If you miss a payment and it is not formally deferred, your principal balance remains unpaid and interest continues to accumulate.

• Missed payments keep your principal balance higher for longer.
• The longer the principal balance remains unpaid, the more interest you will be charged.
• Missed payments may also impact your loan status, credit score, and eligibility for future services.

Extra Payments

Making extra payments is one of the most effective ways to reduce interest over the life of your loan.

• Any amount paid above your scheduled payment goes directly toward your total balance, and helps reduce your principal faster.
• A lower principal balance means less interest is charged daily.
• Extra payments help shorten the time it takes to repay your loan and reduce the total interest cost.

Recap

• Deferrals and missed payments increase the interest you pay because they keep your principal balance higher for longer.
• Extra payments lower your principal balance faster, which reduces how much interest accrues daily.

For more information about how interest is calculated, check out our article on daily accrued interest here:  What Is Daily Interest and How Is It Calculated?

If you have questions about your loan or payment options, feel free to contact us at support@fig.ca.