The coronavirus has caused widespread economic devastation. Millions of workers have been furloughed or laid off and don’t know when, or if, they will be able to return to their jobs. Of those who are still employed, significant numbers have seen their hours or pay rates cut.
These changes have left many Americans struggling to pay their mortgages and other loans. If you know that you will be unable to meet your financial obligations, you may be able to postpone or reduce your payments. But you have to reach out to your lenders to explain your situation and ask for help. The sooner you do that, the better.
Simply not paying a bill is a bad idea. If you skip payments, the lender may charge you penalties and late fees. It will also report the missed payments to the credit bureaus, which can lower your credit score.
Options That Might be Available
Due to the COVID-19 pandemic, financial institutions are working with consumers to help them deal with a sudden loss of income. If you are unable to pay your mortgage, contact your loan servicer. You may be able to get forbearance to postpone your payments for up to 360 days if you have a federally backed mortgage. Many servicers of non-federally backed mortgages are also offering assistance to borrowers. If you work out a forbearance agreement, the loan servicer should report to credit bureaus that your account is current.
Get in touch with your auto loan servicer if you can’t make a payment. You may be able to get an extension or work out an arrangement that will temporarily reduce your payments.
If you are unable to pay your student loan, your options will depend on the type of loan you have. Payments on federal student loans have been automatically postponed interest-free until September 30, 2020. If you have a loan through a bank, credit union or other private lender, or from your college or university, contact that entity to discuss your options.
Explain Your Circumstances
When you contact a financial institution, be prepared to describe your current employment and financial situation, including any changes to your income, assets and expenses. If you can pay part of your bill, figure out how much you can afford. If you can’t pay anything, tell the lender when you think you might be able to resume full or partial payments.
Get in Touch With Your Lenders
The companies you do business with want you to pay them in full and on time, but they understand that may not be possible right now. If you can’t afford to pay a bill, your best bet is to contact the company, explain your circumstances and ask to make alternative arrangements. In many cases, businesses will allow you to reduce or postpone payments, waive late fees or offer other forms of assistance—but you have to ask.