A forbearance agreement is an agreement between the lender and the borrower wherein the lender of the money grants the permission to delay or postpone the payment of the respective installment of the loan. The forbearance agreement mentions the period for which the delay has been permitted, the amount to be paid after the forbearance period expires etc.
When an individual or an entity which has taken a loan or borrowed some amount of money from a bank or any other similar institution finds himself/ herself unable to pay the installment in due time, they can ask the lender to enter a forbearance agreement.
The forbearance only allows for a delay in the payment and no rebate in the interest or payment i.e. as soon as the forbearance expires the interest accruing to the lender in the period of forbearance is also added and has to be paid by the borrower. The agreement records all the terms of the forbearance.
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