As the reality of sheltering in place settles in, many of our clients are asking how best to cut costs and deal with mortgage, credit card and other payments. The Consumer Financial Protection Bureau encourages financial institutions to work with their customers to meet their needs. And the U.S. Department of the Treasury recommends that banks waive ATM, overdraft, late payment and other fees as much as possible, and offer accommodations for borrowers to defer or skip some payments.
To determine your options, start by visiting your financial institution’s website and reviewing any information already posted there. Many have already established programs to assist their customers. For example, several auto insurance companies — including State Farm, Allstate, Encompass and Geico — have announced rebates or discounts for their customers, since driving has been reduced.
If you can’t pay your mortgage or can only pay a portion, contact your mortgage servicer. The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides two protections for homeowners with federally-backed mortgages:
- A foreclosure moratorium, and
- A right to forbearance for homeowners who are experiencing financial hardship due to the COVID-19 emergency.
If you don’t have a federally-backed mortgage, you may still find that your mortgage servicer offers relief options. If you are renting from an owner who has a federally-backed mortgage, the CARES Act provides for a suspension or moratorium on evictions. Visit the CFPB website for more details.
If you have a student loan held by the federal government (most Direct loans taken out since 2010, including Parent PLUS loans), your loan payments will be postponed with no interest until September 30, 2020, thanks to the CARES Act. The waiver will happen automatically — you don’t have to request it — and will be applied retroactively to March 13.
If you’re not sure what kind of loan you have, you can ask your servicer or log in to StudentAid.gov and look at your lender. If the lender is the Department of Education, then it’s a federally-held loan that is eligible for deferral. If the lender shows as Chase Bank or Sallie Mae, for example, it’s still a federal loan, but it’s not eligible for the CARES Act waiver. For these kinds of student loans, you’ll need to contact your student loan servicer directly and inquire about a forbearance or economic hardship deferment. You can also apply for an income-based repayment plan or a zero-dollar payment plan. (Visit StudentPandemicAid.com for a look at options.)
Credit Cards & Other Loans
Anticipating the need, many credit card issuers have already set up programs for customers affected by the coronavirus emergency. Visit their websites first for any information posted there, then be prepared when you call to explain:
- Your employment situation;
- Your current income, expenses and assets;
- How much you can afford to pay; and
- When you’re likely to be able to restart regular payments.
The three main credit bureaus (Experian, Equifax and TransUnion) are also making adjustments during the crisis. For example, lenders must notify the bureaus if a customer has been placed in a special program, such as a forbearance or deferred payment plan. These programs will not hurt consumers’ credit reports. Remember that you can check your credit report for free each year at AnnualCreditReport.com.
Take Action Today
If your income is taking a hit right now, take the time to review your bills and invoices. Then set up a budget that reduces your expenses to meet your new financial reality. Cancel or pause subscriptions for things like gym memberships and season tickets. Transfer credit card balances to lower-rate cards, when possible. But most of all, contact your lenders to let them know of your financial situation. And keep in mind that it may take a while to get a customer service agent on the phone, as they’re especially busy right now.
If your income is taking a hit right now, contact your lenders to let them know of your financial situation. Keep in mind that it may take a while to get a customer service agent on the phone, as they’re especially busy right now.