Get Help With Your Bills
Many lenders are offering breaks to borrowers hit by the coronavirus-fueled crisis.
As the coronavirus shutdown caused businesses to cut staff, a staggering number of Americans filed for unemployment benefits — 26 million people made initial claims over the course of five weeks from mid March to mid April. If you’re among those dealing with a loss of income, you may be struggling to keep up with bills — or you may anticipate trouble down the road if you can’t get back to work soon.
Many lenders are providing relief to customers, whether voluntarily or because it’s required by new federal mandates. According to a survey from LendingTree, 91% of those who asked for a break on their mortgage or credit card payment because of coronavirus-related circumstances got one. The key word is asked. With the exception of federal student loans, you generally have to contact your lender to get relief.
Be proactive. Reach out to your lender before you miss a payment. The Coronavirus Aid, Relief and Economic Security (CARES) Act includes a requirement that lenders report your account as current to the credit bureaus —Equifax, Experian and Trans-Union — if you are affected by consequences of the pandemic and are current on your account when you enter an agreement to defer payments, make partial payments or use some other accommodation. The rule applies to agreements made between January 31, 2020, and the later of 120 days after March 27, 2020, or 120 days after the end of the national emergency regarding the coronavirus. To ensure that your credit reports don’t reflect negative information that shouldn’t be there, you can visit annualcreditreport.com to get a free copy of your report from each bureau. Normally, a new report is available only every 12 months, but through April 2021, you can get a report weekly.
Before you call your lender, do some prep work. The Consumer Financial Protection Bureau recommends being ready to talk about your financial and employment status, the amount of your debt obligation that you can afford to pay, when you expect to be able to restart regular payments, and details about your income, expenses and assets. “You might end up sitting on hold for an hour or more,” says Sara Rathner, credit card expert for personal-finance website NerdWallet. “You want to make that call worth it.”
If you work out an agreement with your lender, get confirmation of the terms in writing, and make sure that you understand them. Your lender may, for example, temporarily reduce your payment or allow you to skip some payments but expect you to later cover the amount that you missed, either all at once or through extended or increased payments. And interest may still accrue on your balance while payments are paused. As the end of the relief period nears, if you don’t think your circumstances will improve enough to return to your regular payment schedule, ask the lender if you qualify for an extended program, says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling.
Help for homeowners and renters. As of mid April, 6% of mortgages were in forbearance (providing a temporary suspension or reduction of payments), compared with only 0.25% in early March, according to the Mortgage Bankers Association. The CARES Act includes protections for homeowners with federally backed mortgages. Almost half of U.S. mortgages are owned or backed by Fannie Mae and Freddie Mac; other federal entities that own or back mortgages include the Federal Housing Administration, Department of Veterans Affairs and Department of Housing and Urban Development. If your loan qualifies, your lender can’t foreclose on you for 60 days after March 18, 2020. And if you’re suffering financial hardship related to the pandemic, you can request up to 180 days of forbearance, plus one extension of up to 180 days. Lenders can’t add extra fees, penalties or interest during the forbearance. If your mortgage is not federally backed, relief is at your lender’s discretion — unless your state has its own forbearance requirements — but many institutions are offering it.
The CARES Act also mandates that landlords who use federally backed or multifamily loans for their properties cannot evict tenants for nonpayment of rent for 120 days starting March 27, 2020. Plus, some state and local governments have issued their own moratoriums on all evictions. If you can’t pay your rent, talk to your landlord. Even if not required by authorities, he or she may be willing to temporarily trim or halt payments.
Assistance for credit cards and auto loans. Major credit card issuers are generally offering relief, and some have publicly specified certain options in response to the pandemic. Chase allows customers to delay up to three payments, and Citi will waive minimum payments and late fees for up to two statement cycles. If your credit-card bills are unmanageable, ask your issuer what’s available through its hardship program, such as a lower interest rate or reduced or suspended payments. Keep in mind that entering a hardship program may come with its own difficulties. The issuer may freeze your credit card, which is problematic if you rely on it for basic expenses such as groceries, says Rathner.
Many auto lenders are also willing to work with borrowers who can’t keep up with payments. Acura and Honda Financial Services, for example, are offering deferrals of up to 60 days and late-payment fee waivers to existing customers.
Where to Find More Info
Check out these resources for borrowers.
Your lender’s website. Many major lenders provide information about their coronavirus-related programs online, and you may be able to apply for payment deferrals or other options through the website.
Your state and local government websites. Look up your locality’s policies about homeowner assistance, suspension of evictions and other programs.
The Consumer Financial Protection Bureau. At consumerfinance.gov/coronavirus, find links to pages with advice for those experiencing financial difficulties.
The National Foundation for Credit Counseling. To get low-cost help forming a debt-management plan, connect with a credit counselor from a nonprofit agency at 800-388-2227 or nfcc.org.