27 Apr What is Forbearance (and what to watch out for!)
With the precautions taken to combat the COVID-19 outbreak, many found themselves out of work or making far less than they were before. In order to help those who found themselves in this position, the CARES Act has inspired/ allowed/ required many mortgage lenders/ loan servicers and, yes, car lenders and credit card companies to offer relief in the form of Forbearance.
Last week, we cautioned you of those who are taking advantage of those most in need by scamming them into paying money to speak with their lender (and then not doing it) about legally being able to skip payments or, simply taking all your information in order to steal your identity. The best way to prevent that is to ONLY SPEAK DIRECTLY WITH YOUR LENDER OR LOAN SERVICER.
This week we talk about what forbearance means and the different types of repayment that is being made available to those who apply for it.
As you heard in the video, FORBEARANCE IS NOT FORGIVENESS. You still have to make the payments one way or another. Forbearance offers a “pause” in your payments during the difficult time, but you will need to make up those payments!
There are basically three ways to make up the payments:
- Lump sum payments at the conclusion of the “pause” or forbearance period;
- Scheduled repayments which add to your loan payment beginning immediately following the forbearance period; or,
- Additional payments added on to the end of your loan term.
You may download two things directly from our website:
- Copy of the chart shown in the video of the different types of forbearance.
- A list of questions to ask your lender (and yourself) before you agree to a forbearance plan.
We offer this information to help you make wise decisions regarding forbearance if you’ve been negatively impacted financially by the COVID19 crisis.
Another issue you want to be particularly careful of when utilizing forbearance is it most likely will reflect in your credit report (we’ve already seen it).
Most of us have been spending a lot more time at home. You may have discovered that you have too much or too little house; or, that you want to be closer to (or further away from?) family. In other words, a result of coming out of this experience may be that you want to make a change in your living arrangements. Utilizing forbearance may limit your choices going forward because of credit reporting. In other words, use forbearance if you need to, but don’t utilize it just because you can.
If you have any questions or want more perspective on this or other aspects of the housing market, give us a call, text or email. We’re happy to help you!
Loan Forberance Questions – https://yourbestedge.com/wp-content/uploads/2020/04/Loan-Forbearance-Questions.pdf
Forbearance Examples – https://yourbestedge.com/wp-content/uploads/2020/04/Forbearance-Examples.pdf