How to ask your bank or lender for help

Many banks, credit card issuers and other lenders have promised to help those affected by the coronavirus pandemic. They are offering to defer or reduce payments and waive interest charges and reimbursements for those who have lost their jobs, had their hours reduced, or otherwise lost their income due to the COVID-19 crisis. .

However, help is usually not automatic. You have to ask for it – and ask in the right way.

“In many cases, you only get help if you contact your creditor and mention that you need help because of the coronavirus situation,” says Lauren Saunders, associate director of the National Consumer Law Center. “And it’s very frustrating because it’s very difficult to reach your bank or your lender.”

Many financial institutions are encouraging people to reach out digitally – through live chats or messaging on company sites or in their mobile apps. Whichever way you connect, there are important questions to answer.

Among them:

‘What steps do I need to take to qualify?’

You can start your research on the financial institution’s site to see what types of assistance may be available and how to apply. Typically, you’ll want to confirm details with a human, including the steps to apply, says Saunders, who advises keeping a record of the conversation and what you’ve been told. You can take written notes of phone calls, including the time, date, and name of the company representative, or take screenshots of electronic communications.

“Some think that [a hardship program] will automatically trigger if they just miss a payment, which is very dangerous to assume,” says Bruce McClary, spokesperson for the National Foundation for Credit Counseling.

Skipped payments can lead to damage to credit rating and collection calls, and could limit the hardship options available.

There is a forbearance program that is automatic, but it only applies to student loans held by the federal government. Payments on these loans are suspended until September 30 and interest has been waived.

‘How exactly does it work?’

Companies take different approaches to their hardship programs. A lender may allow you to skip payments but charge you a late fee; another may waive the fee but report skipped payments to the credit bureaus. Most will continue to charge interest, and some will expect you to make a lump sum payment of the amount you skipped.

“It’s not free money,” Saunders says. “It’s just deferring a debt that you have to pay off with your other debts later.”

Even if your financial difficulties are over, you may not be able to pay several months of payments at once, notes McClary.

“The last thing you want is to have to pay someone a large sum of money when you’re in a financially fragile state,” notes McClary. “It’s important to try to negotiate different terms.”

Ask if payments can be added at the end of the loan or paid off over time, suggests McClary. Also request that the account be reported “paid as agreed” to the credit bureaus to avoid a potentially large impact on your credit scores.

‘How long will the aid last and how can it be extended?’

A hardship program can last three to six months, but you may have the option of extending the relief if you request it.

If you can’t make payments on your federally guaranteed mortgage due to the coronavirus pandemic, for example, you have the right to skip payments for almost a year. The CARES Act requires lenders to grant affected borrowers forbearance for up to 180 days, with the option to request an additional 180 days thereafter. Skipped payments do not need to be repaid all at once, but can be spread over time or added at the end of the loan.

However, lenders may not make this clear. Some borrowers who applied for mortgage forbearance in recent days were told they would owe a lump sum after three months, with no mention of potential extensions.

These rules apply only to mortgages backed by federal entities, including Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Veterans Administration (VA), and the US Department of Agriculture (USDA). But most mortgage lenders have some type of hardship program or loan modification options.

Don’t delay in seeking help if you’re struggling, as it’s unclear when the coronavirus-related economic disruption will end. It is better to have more help than you need than to need more help than you have.

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Liz Weston is a writer at NerdWallet. Email: [email protected] Twitter: @lizweston.

The article How to ask your bank or lender for help originally appeared on NerdWallet.

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