What To Do If You Can’t Make Your Loan Payments

Despite all the stimulus checks and child tax credits helping us out, debt is still a big deal. The total U.S. household debt is $499 billion higher now than it was at the end of 2019.
Unemployment rates are falling back to semi-normal levels—5.9% in June 2021 compared to 14.8% in April 2020. But it can still be tough to pay the bills. If you’re having a hard time paying all your bills or are facing delinquency, you should look into a loan payment relief program.

Loan payment relief programs

Many lenders have offered loan payment relief during the pandemic, and for good reason. Beyond simple debt forgiveness, loan payment relief programs are often a way for lenders to help borrowers AND themselves. The borrower can make their monthly payments, and the lender benefits from at least some of the repayment, even if it’s smaller than normal.

Types of loan payment assistance programs

Assistance programs exist for all types of loan borrowers. Help can range from refinancing student loans to mortgage relief for homeowners, debt consolidation for credit cards, and more.

Refinance

Refinancing is usually helpful to make monthly payments more manageable or save money on interest paid. Homeowners with an FHA (Federal Housing Administration) or VA mortgage might be able to refinance to lower their interest rate. Those with student loans and personal loans can also request a refinance.

Deferment

Some lenders will allow you to pause your payments for a short time, usually one to three months. Interest will continue to accrue while your loan is in deferment.

Forbearance

Homeowners who have experienced financial hardship due to COVID-19 can request to pause or reduce monthly mortgage payments under the CARES Act. Loans need to be backed by HUD/FHA, USDA, VA, Fannie Mae, or Freddie Mac, and you need to request it by September 30, 2021. The forbearance period is 6 months. According to the Student Aid website, a direct loan is also eligible for administrative forbearance.

Debt consolidation

If you owe a lot of credit card debt, it might be best to consolidate it into one personal loan. You may save money because interest is generally calculated and applied only once (vs. credit cards, which compound interest daily). If you have a good credit score, you could also consolidate debt with a low interest home equity loan or home equity line of credit.

Interest and/or fee waiver

Some lenders waive interest or fees associated with an account that meets eligibility requirements. For example, if you’ve been making your loan payments on time, you are more likely to get a maintenance fee waived if you ask for it.

Loan modification

If you meet eligibility criteria, your lender might be willing to change the terms of your loan. This could mean lowering your interest rate, giving you more time to repay, offering a different type of loan, etc.

Repayment options

Sometimes a simple due date change could mean the difference between “I need help” and “I’m doing good.” Call your lender to ask if your loan program offers due date changes or the option to pay in cash at a retailer near you so you can still make payments on time.

Eviction and foreclosure moratorium

If your mortgage is delinquent, you might still get to stay in your home because of the FHA’s eviction and foreclosure moratorium. The deadline for first legal action and reasonable diligence is extended for 180 days after July 31, 2021.

Small business relief

The U.S. Small Business Administration (SBA) provides assistance for small business loans. The SBA automatically makes monthly payments for the equivalent of six months of payments. Additional economic assistance may be available if you contact your lender.
Read on to find out about the different companies that offer loan payment relief options.

Companies that offer loan payment relief programs

If you call them, most financial companies will consider a request for loan payment assistance if you’re experiencing financial hardship. The lenders below specifically listed the assistance they might offer eligible customers. Most of the time, eligibility requires a solid payment and/or credit history.

Upstart

Upstart provides alternative payment plans for customers experiencing hardship. This could include fee or penalty waivers, student loan deferrals or reductions, or additional repayment assistance.

PNC

PNC details various ways to get help. Personal credit card, auto loan, personal loan, or home equity loan or line of credit customers can apply for their Consumer Loan Hardship Assistance online. Other customers will need to call the number listed on their coronavirus update page.

PenFed

PenFed’s Financial Hardship Center describes multiple ways they help customers. Help includes payment deferrals, forbearance, or repayment modification.

Wells Fargo

Wells Fargo is offering payment assistance to student loan and personal loan customers. This includes deferred payments for eligible customers. Call 1-866-828-5047 for more details and to see if you’re eligible.

Capital Good Fund

The Capital Good Fund offers a Crisis Relief Loan in Rhode Island, Florida, Massachusetts, Delaware, Illinois, Texas, and Colorado. The loan ranges from $300 to $1500 with a 15-month term, and only a 5% APR. Payments start 90 days after closing.

Truist

Truist’s personal loan payment relief guide describes how approved customers may be able to suspend monthly payments temporarily if they’ve lost income or experienced a natural disaster. However, the interest keeps accruing on loans, so customers will end up paying more interest in the long run.

HSBC

HSBC’s coronavirus update page describes multiple relief options for account holders. They offer fee waivers, early withdrawal penalty waivers, lowered monthly payments, lower interest, payment assistance, and other options for deposit accounts, personal loans, credit cards, mortgages, and business banking.

Costs

You shouldn’t pay any fees to get loan payment relief. If someone asks for a fee or “tax,” chances are that’s a scam. But as most lenders will probably tell you, loan payment relief doesn’t necessarily save you interest. Interest keeps accruing while your loan payments are deferred, which could add to the life of your life or to your monthly payments once you start paying again.
For example, imagine your loan balance is $10,000 with an interest rate of 10% and a repayment term of 5 years. If you defer payment for only one month, you would add $82 to your loan balance.

Pros & cons

Pros
  • Save money. Many loan payment relief programs lower your interest rate, lower your monthly payment, or pause your payments altogether.
  • Reduce stress. If you’re able to reduce debt and save money, you may be at less risk for stress and anxiety.
  • More time. If you’re able to find debt relief, you can refocus your energies on family, work, or health.
  • Keep credit intact. If your loan payment relief lowers payments to the point that you can actually pay them on time, vs. being delinquent or defaulting, your credit won’t be harmed.
Cons
  • Possibility of scams. Con artists may promise you a debt consolidation loan if you pay them a fee in advance. Or a fake credit repair clinic may promise to clean up your credit report for a fee.
  • Doesn’t always lower debt. Just because a program changes your due date, lowers your interest rate, or delays your payment doesn’t mean your debt disappears.
  • Complicated. With many federal relief programs, the rules seem to keep changing and it can be hard to keep up with.

The bottom line

If you’re in debt and can’t make your monthly payments, you should consider a loan payment relief program. Assistance exists for virtually every type of loan, from student loans to mortgages and personal loans. Just be sure to read the fine print, compare programs, and rule out any possibility of scams. Good luck getting some relief!

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