Repayment Plan
A structured agreement to repay overdue loan amounts through additional payments over a defined period.
What is Repayment Plan?
A repayment plan is a formal agreement between a borrower and lender to bring a delinquent loan current by spreading the overdue amount across a defined number of future payment periods. Under a typical repayment plan, the borrower pays their regular monthly payment plus a portion of the arrears with each installment until the account is fully reinstated. Repayment plans are a loss mitigation option offered by servicers as an alternative to foreclosure or collection proceedings, and federal regulations require mortgage servicers to evaluate delinquent borrowers for repayment plan eligibility before initiating foreclosure. Unlike loan modifications (which permanently restructure the loan) or forbearance (which temporarily suspends payments), a repayment plan requires the borrower to begin repaying the deferred amounts immediately on an accelerated schedule.
Example
A borrower falls three months behind on their $2,000 mortgage, accumulating $6,000 in arrears. The servicer offers a 6-month repayment plan: the borrower pays $3,000 per month ($2,000 regular payment + $1,000 toward arrears) for six months, fully reinstating the loan without additional fees or foreclosure proceedings.
Source: Consumer Financial Protection Bureau — Repayment Plans