Banks, Creditors, and More Are Offering Leniency for Those Affected By Coronavirus—Here’s What You Need to Know

Banks, Creditors, and More Are Offering Leniency for Those Affected By Coronavirus—Here's What You Need to Know

Here’s how you can limit your financial hardship and protect your financial future.

Asking for help is never easy, but with unemployment at an all-time high because of the coronavirus pandemic and resulting economic crisis and physical or social distancing regulations, now may be the time to seek out some financial aid. The U.S. CARES Act included provisions to help those who have lost income, but for those who are newly unemployed or facing pay or hour cuts, even a well-stocked emergency fund, enhanced unemployment benefits, or a stimulus check may not be enough to help cover expenses.

If you or your partner have lost your job or otherwise experienced a loss of income, you have options—a lot of them.

“One of the first things to keep in mind with COVID-19 is the fact that it isn’t state, regional, or national,” says Reva Azeez, CFBS, financial advisor with MassMutual Greater Houston and managing partner with ROA Partners. “It’s global. Companies are very well aware of the issues relating to the virus and, as a result, the financial impact to their customers.”

You’ve likely heard it from countless sources, but it’s true: We’re all in this together. If you’ve lost income, you’re not alone, and companies, lenders, service providers, and more are offering a variety of options to help those facing financial hardship manage their expenses.

The catch is that you have to ask. Financial aid, forbearance options, unemployment benefits, and more won’t find you—you’ll have to seek them out.

“You have to request help,” says Brittney Castro, CFP for Mint. “It may mean making lots of phone calls and dealing with a long wait to actually speak to someone. It’s a difficult time for many and looking at your budget and dealing with your finances is likely the last thing you want to do.”

Still, that’s exactly what you must do, especially if you expect your unemployment or income loss to last for several months, or at least until this crisis ends. Being proactive and asking for aid immediately, before you miss a payment, will protect your credit score and put you in a better position to move forward and continue working toward your financial goals once this crisis ends, Castro says. Falling behind on payments without asking for assistance from banks or creditors could damage your credit score for years to come and make it even more difficult to access loans and credit in the future.

The very first thing you should do is complete a full assessment of your finances. If you qualify, apply for unemployment or other assistance programs as soon as possible: “Even if the money won’t come immediately, it’s important to make sure you are in the system as soon as possible by filing all the necessary paperwork,” says Bobbi Rebell, CFP and personal finance expert at Tally.

Next, find any possible spending categories where you can cut back. “Revisit your monthly budget to see if there are discretionary expenses that can be reduced or eliminated,” says Julie Virta, CFP and senior financial advisor with Vanguard Personal Advisor Services. “Review your monthly payments and contact your creditors to determine which payments can be reduced or deferred.”

It’s not possible to cancel your payments entirely—the money you owe won’t just disappear, unfortunately—but many companies are allowing people to defer payments until they get new jobs or regain lost income to keep accounts in good standing and avoid damage to credit scores. Custom payment plans, in which you pay bills or repay debts in a staggered timeline, are also available.

“The benefit of deferring payment is to have more time to pay your bill or repay a loan,” Azeez says. “While debts and expenses will likely not be forgiven if payments cannot be made, this should help provide individuals who have been impacted by a loss of income with additional time to find a new income source and to continue making regularly scheduled payments.”

Before you commit to a payment plan or deferment, though, be sure you understand the conditions of it. Ask how long payments can be deferred and if interest rates can be waived or lowered in the interim. If you’ve asked for a forbearance, be sure you understand the terms of repayment at the end of the forbearance: Some conditions may require a lump sum payment of all missed payments later on.

“At this point, companies are aware that their customers need help and they’ve established a process for how to deal with those requests,” Castro says. “You need to let them know that you’re facing financial hardship and need to pause your monthly payments. You should also advocate for yourself when it comes to any late fees and interest charges, especially if you have a history of on-time payments with the company. Ask if late fees or interest can be waived or reduced.”

And, experts agree, try to get written confirmation of a payment plan. This can both help you keep track of what you’ve agreed to and help protect you later on, if a company demands payment ahead of schedule.

RELATED: Is It Safe to Spend Money Right Now? Experts Weigh In

Leniency for those facing financial hardship can be found from many servicers and lenders—but, again, you have to ask. Castro says many auto loan lenders are allowing certain customers to defer car payments; for handling mortgages during coronavirus, federally backed mortgage loans allow borrowers to request forbearance, and some private mortgage loan servicers are offering similar options. If you’re a renter, reach out to your landlord to ask about payment plans or other creative arrangements for paying your rent. Many states and cities have placed moratoriums on evictions and foreclosures, so you cannot be kicked out of your home, but it’s in your best interest to remain on the best possible terms with your landlord or mortgage provider.

Many utility companies have placed moratoriums on disconnections during the pandemic, Azeez says, so you likely don’t need to worry about your power or water getting shut off. (Always check your providers’ websites to see if that is the case for you.) Still, contact your utility companies directly so you can check on the details and discuss how and when you will need to make payments again.

With credit cards, many companies are allowing certain customers to pause payments or waiving or reducing late fees and interest charges. Racking up more debt on a credit card during this crisis should be a last resort, but you might not need to worry about immediate payments on a balance you’re already carrying. In many cases, though, interest will continue to accumulate even if you have deferred payments, Rebell says, so keep an eye on your balance to ensure it doesn’t get out of control.

If you have student debt, reach out to your loan provider to discuss payment deferment options or interest suspension. Student loans owned by the federal government will have a 0 percent interest rate until September, so those with federal student loans will not have to worry about their loans accumulating more interest during this crisis. If you are able to continue making payments, though, you will be paying off the principal, making it possible to pay off loans more quickly.

If you are experiencing financial hardship as a result of coronavirus and want to explore your options, check providers’ websites first. Based on their updates on how they’re helping customers during the crisis, decide if you qualify and whether you need to reach out for extra assistance. You can also refer to the Consumer Financial Protection Bureau’s website to learn more about resources available to you.

“The key here is to act as quickly as possible,” Virta says. “Creditors have been, and will likely continue to be, inundated with requests. If you need assistance, don’t wait.”

If you’ve been a customer for a while, express that to the customer service agent you speak to. If you’ve never missed a payment, say that, too. Companies may be more willing to extend leniency to borrowers in good standing.

“It might be a frustrating process and you may have to call back more than once, but don’t give up,” Castro says. “Your future self is counting on you.”