Getting Through Today's Financial Stress

On top of already high levels of anxiety caused by the global coronavirus pandemic, many people are feeling the added stress of financial pressures. Whether it’s bills, mortgages, student loans, or credit card payments, many of us are feeling more squeezed than ever before.

Most financial professionals agree that the best way to help ward off financial stress is to face issues head-on and take whatever actions you can.  The following are some tips and sources of information for navigating this time of financial stress. 

Staying Ahead of Creditors

If you’re finding it difficult to pay loans or bills due to COVID-19, or if you think you’re moving in that direction, head off trouble now by contacting the people or companies you owe money to. You can often arrange easier payment terms by being proactive, forthright, and willing to problem-solve. Do this before your account is given to a debt collector.

If you have a bill that is already in collections, it may still be possible to agree on a repayment plan with collectors. The Consumer Financial Protection Board (CFPB) provides these resources for contacting and negotiating with debt collection companies. 

For more actions you can take if you have trouble paying your bills, see the CFPB’s page on protecting yourself financially from the pandemic’s impact. 

Be aware that creditors and debt collectors generally cannot take your Social Security or VA benefits, or other benefits. If you want to dispute a debt, send your written request to the collector to make your dispute official and request more information on the debt.

Mortgage Relief Options

If you can’t pay your mortgage payments, you can contact your mortgage servicer immediately. Make sure to have your account number handy, and be aware that it may take much longer to reach them by phone given high call volumes.

If your mortgage is federally backed, a new federal law—the Coronavirus Aid, Relief, and Economic Security, or CARES Act—may really help. It establishes two protections for homeowners with these mortgages: 

• A foreclosure moratorium: your home can’t be foreclosed for 60 days after March 18, 2020
• A right to forbearance (temporary payment suspension) for up to 180 days if you’re experiencing financial hardship because of the pandemic, with the right to request one extension up to an additional 180 days. (Contact your loan servicer to request this forbearance)

You’re covered by these protections if your mortgage is federally owned or backed by:

• U.S. Department of Housing and Urban Development (HUD)
• U. S. Department of Agriculture
• USDA Direct
• USDA Guaranteed
• Federal Housing Administration (FHA) (Includes reverse mortgages)
• U.S. Department of Veterans Affairs (VA)
• Fannie Mae
• Freddie Mac
• To find out if your mortgage is owned or backed by Fannie or Freddie

• Visit Fannie
• Visit Freddie

If your mortgage is backed by Fannie Mae or Freddie Mac and you’re granted forbearance, during this temporary period you will not:

• Incur late fees 
• Have delinquencies reported to credit reporting companies

Even if your mortgage isn’t federally backed, you may be eligible for relief through your mortgage servicer. 

If you’re not sure who owns or backs your mortgage, call your servicer. This is usually the company you send your monthly mortgage payments to. Consult your mortgage statement if you’re still not sure.

Once you’ve identified your mortgage servicer, call them and be prepared to explain: 

• If you are unable to make your payments as a result of COVID-19 hardship
• Whether your problem paying is temporary or permanent 

Also be prepared to ask:

• What your options are to temporarily reduce or suspend your payments
• Any forbearance, loan modification, or other options you may have
• Whether late fees can be waived

Whatever you’re able to work out, clarify your understanding and cover yourself by getting a written confirmation from your servicer with the details of your forbearance agreement.

Your state may also offer mortgage relief options. These may include foreclosure suspensions and other homeowner assistance. Visit your state’s government website to learn more. 

Finally, whether you ask for relief or not, keep watch on your credit. Stopping your mortgage payments without a forebearance agreement can negatively impact your credit history. If this is done in error, you can and should dispute it. See below for more details on managing your credit. 

If you rent

The CARES Act also protects renters. If your landlord has a federally backed mortgage or a multi-family mortgage, you’re protected from eviction for nonpayment of rent for 120 days beginning on March 27, 2020. Once this 120-day period is over, your landlord must provide you with a thirty-day notice to vacate. 

Note that many states have suspended all renter evictions due to the pandemic.

Keep an Eye on Your Credit Report

During this time, it’s especially important to make sure your credit report is accurate.

Many of us believe that checking our credit report isn’t necessary. Some believe it can hurt their credit score to request their report. Neither is true. 

You’re entitled to a free credit report from the three companies in the U.S. that produce credit reports (Equifax, TransUnion, Experian) at least once a year. You can get reports from all three agencies through the Federal Trade Commission’s simple one-stop service, one of three ways:

• Submit a request online at www.annualcreditreport.com.
• Call toll-free: 877-322-8228
• Complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service P. O. Box 105281 Atlanta, GA 30348-5281

You can also get a free credit report at any time if:

• You’re denied credit, insurance, or employment based on your credit report
• You’re unemployed and looking for work
• You’re receiving public assistance
• Your report is inaccurate because of fraud, including identity theft

You can contact each agency at:

Equifax: 800-685-1111 or www.equifax.com

Experian: 888-EXPERIAN (888-397-3742) or www.experian.com

TransUnion: 800-916-8800 or www.transunion.com

How to check your credit reports

Once you have copies of your credit reports, check them for:

Identity errors

• Are your name, phone numbers, addresses, etc. correct?
• Does your report mistakenly include any information about another person with the same or similar name?
• Are there any accounts that aren’t yours?

Incorrect account status

• Are any closed accounts shown as “open?”
• Are you listed as an account owner for accounts where you’re only an authorized user?
• Are any accounts incorrectly shown as late or delinquent?
• Are any dates of last payment, account opening, or first delinquency incorrect?
• Is the same debt listed more than once?

Data errors     

• Is incorrect information still showing, even after you’ve corrected it?
• Do any accounts appear several times with different creditors?

Balance errors    

• Are all current balances correct?
• Do any accounts show an incorrect credit limit?

If you find errors

Contact the credit reporting agency and the company or institution that provided the information. Credit reports always include instructions on disputing information. You can also use the CFPB’s sample dispute letters for furnishers and credit reporting agencies. 

Student Loan Relief 

Federal student loans 

The CARES Act also automatically suspends principal and interest payments on all federally-held student loans through September 30, 2020. Interest will not accrue while these payments are suspended.

If you’re a federal student loan borrower, you don’t need to take any action to stop making payments. Your federal student loan servicer will suspend payments automatically. If someone contacts you asking you to pay a fee to suspend your payments, it’s a scam.

The vast majority of student loans issued since 2010 are held by the federal government. Others are not:

• Some federal student loans under the Federal Family Education Loan (FFEL) Program loans held by commercial lenders
• Some Perkins Loans held by your school
• All private (non-federal) student loans owned by banks, credit unions, schools, or other private entities

None of the above loans are currently covered by the CARES Act.

Federal student loans held by commercial lenders

If your federal student loan is held by a commercial lender, you have two possible options

• Explore getting an income-driven repayment plan. Depending on your income or the size of your family, your payments could be as little as $0. Visit https://studentaid.gov/app/ibrInstructions.action.
• If you just want a temporary pause on payments, explore forbearance or deferment with your lender.

Private student loans

If you have a private student loan, explore your options by contacting your loan servicer. You may be able to:

• Request a recalculated monthly payment, if your income has changed
• Postpone your payments with a forbearance, if your income hasn’t changed but you face financial distress

If you can’t do this on your servicer’s website, call your servicer.

Debt Relief

If you’ve taken the above steps and still find your debt is unmanageable, you may want to contact a debt relief service—a credit card counselor or debt settlement firm. Either one can provide advice and strategies for controlling expenses and bills and repaying creditors. Or you might negotiate directly with creditors or debt collectors.

Debt consolidation rolls all of your debt into one loan such as a second mortgage or home equity line of credit, and may also be an option. Among other things, it can lower your interest charges. But be aware of the risks. Debt consolidation often uses your home as collateral, which could put your home at risk if you fall behind on payments. Again, research the details and get everything in writing.

Our Should I consolidate my debts online calculator can help you start to compare your existing loans and credit cards with a new, consolidated loan.

As with any service provider you’d consider, do your homework before hiring or signing on with anyone. Your state attorney general’s office or state consumer protection agency may have information on the firm or service you’re considering. Get clear on the details, including costs, services provided, and the timeline—and get it all in writing.  Reputable companies should not ask for an upfront fee. 

Slap Down the Scammers

In stressful times like these, scammers often come out from under their rocks in full force. This includes fraudsters posing as debt collectors.

Here are some of the telltale signs of scams, according to the CFPB:

• They charge a high up-front fee for their services
• They promise to get you a loan modification
• They ask you to sign over your property title
• They ask you to sign papers you don’t understand
• They tell you to make payments to someone other than your servicer
• They advise you to stop making payments altogether
• They promise you payments in connection with providing your credit card numbers and other personal information.

The CFPB offers information on how to handle your finances during times of stress—and the better times that are surely ahead of us. For more, visit https://www.consumerfinance.gov/coronavirus/.

This content has been compiled from various sources of information;

https://www.consumerfinance.gov/coronavirus/
https://www.consumer.ftc.gov/articles/0150-coping-debt
https://www.consumerfinance.gov/ask-cfpb/what-is-the-best-way-to-negotiate-a-settlement-with-a-debt-collector-en-1447/
https://www.consumerfinance.gov/about-us/blog/guide-coronavirus-mortgage-relief-options/
https://www.consumerfinance.gov/about-us/blog/what-you-need-to-know-about-student-loans-and-coronavirus-pandemic/
https://www.consumerfinance.gov/about-us/blog/coronavirus-and-dealing-debt-tips-help-ease-impact/