What Does Payment Relief During COVID-19 Really Mean? (Part I)

• The headlines about being “payment-free for 90 days due to COVID-19” are dangerous because some people do not read past the headline and assume that they can skip their bill payments. 
• People need to realize that there are consequences to all decisions, even if they look attractive.

The headlines about being “payment-free for 90 days due to COVID-19” are dangerous because some people do not read past the headline and assume that they can skip their bill payments. However, if you need the relief, contact your lender but be aware they may not have your best interest at heart (that's your job!).

For those who could pay but would just rather not, due to all the uncertainty, this article is for you. People need to realize that there are consequences to all decisions, even if they look attractive. The saying, “Everything that glitters ain’t gold,” applies to those attractive deals that sound good at the moment, but will eventually lead you down a path filled with debt.

Many people have lost income, jobs, business opportunities, and childcare. It is stressful! Yet, bills are still due and lenders want their money.

Here we will discuss what to ask your lenders before accepting payment options like:

Deferment

The deferment period is a time during which a borrower does not have to pay interest or repay the principal on a loan.

Example: Your student loan payments are deferred while you are still in school

Forbearance

A temporary postponement of payments. It is a form of repayment relief granted by the lender in which terms are negotiated between the borrower and the lender. The borrower must demonstrate the cause for repayment postponement, such as financial difficulties associated with a major illness or the loss of a job. (Keep in mind: Payments may be postponed, but interest is still accruing so this is considered a more expensive option than a deferment).

Grace period

A grace period is a period of time, usually about 10 days or more, during which a past due amount can be paid with little or no penalty.

My advice: Ask what happens after the grace periods are over.

Call your bank or lender and ask them what your options are if you can't pay. Most have been suggesting applying for a 90-day grace period, but the key here is to ask for the terms and conditions in writing BEFORE you agree to the relief option they suggest.

CapWay Tip: Ignorance of the law, i.e., not knowing all the details of what you signed up for, is not a valid excuse. You will be held to what you agreed to. Lenders usually send additional terms and conditions AFTER you verbally agree to the program to make sure you know what you agreed to. You have to read the terms (very few people read it). A 90 days grace period sounds good because it could mean no interest, fees, or negative credit reporting.

To review the second part of this article, click here.

Jala Eaton, Esq., is a certified trust and financial advisor. If you are in need of trusted financial advice, please contact her at www.onmyownfinancial.com