What does "deferred interest" mean?

Deferred interest refers to interest that accumulates on a loan but is not required to be paid during the loan's term. This means that while the borrower is not making interest payments, the interest is still accruing, which could result in a larger principal balance when payments are required later. This concept is commonly seen in certain types of loans, such as some adjustable-rate mortgages or student loans, where borrowers may have the option to defer interest accumulation. By choosing this option, borrowers can minimize their immediate financial burden, but they should be aware that the total amount owed may increase over time due to this accrued interest.