Personal Loans
63% of Americans Say Their Finances Have Been Impacted by Coronavirus
Note: this resource page is being updated regularly. It was last updated on July 1, 2020.
By Erika Giovanetti | Edited by Michael Galvis
The coronavirus pandemic has put a strain on the personal finances of many Americans. If you are having trouble making personal loan payments, relief may be available. Below is a growing list of lenders offering help during the pandemic, but you should contact your lender if you need assistance.
Forbearance
In certain circumstances, your lender may allow you to forgo making payments for a few months. Your loan will continue to accrue interest and you’ll still have to make the payments at the end of the term, either in one lump-sum payment or as an installment loan.
Refinancing
Borrowers who can’t afford their entire loan payment but can still pay some amount could consider refinancing for a lower APR or longer terms. This can help bring your monthly payment down without the need to go into forbearance or default. Keep in mind that you might be on the hook for a loan origination fee with your new loan, or prepayment penalties if your old lender decides not to waive them.
Payment plans
If you’ve missed multiple payments on your personal loan, your lender may allow you to break up the missed payments across a number of months going forward.
If these options don’t offer the help you need, you may consider entering a debt management plan through a nonprofit credit counseling agency. This type of program can help you become current on past due accounts and reduce costs on your debt. Although they can come with fees, the credit counseling agency may be willing to offer reduced or no fees on your plan.
But generally, you should first see what options your lender has that are available to you. While there may not be specific programs listed on their website, many banks and lenders suggest contacting them if you need loan assistance due to the coronavirus.
Congress approved a $900 billion relief package that, if signed by President Trump, would include a $600 direct stimulus payment to most Americans and a $300 per week supplemental jobless benefit. However, the average American pays more than $1,200 toward debt each month, and many have long fallen behind on other bills due to reduced income, unemployment and other financial emergencies.
When you can’t pay all your bills, prioritize them. Generally, it’s most important that you pay secured debts and court-ordered debts before all else. If you fail to pay your auto loan or mortgage for multiple months, your assets could be seized by the bank. Plus, failing to pay court-ordered debt may result in wage garnishment or even jail time.
It’s also important to pay your utilities, like water and energy bills, every month to avoid them being cut off. While many utility providers and state legislators have stopped shut-offs during the coronavirus pandemic, there’s been no official moratorium to stop utility shut-offs in any federal coronavirus relief bills so far.
Unsecured loans and credit cards are lower-priority debts. Since they are unsecured, you don’t risk losing an asset. However, you will risk your financial institution reporting you to the credit bureaus, which will lower your credit score. If you can, try to make the minimum payments on your credit cards to avoid late fees and a ding on your credit report.
The coronavirus pandemic has resulted in the temporary closures of many restaurants, schools, travel destinations and other gathering places. Because of this, many people may struggle to make ends meet. In times of high unemployment, predatory lenders take advantage of the helpless situations that people find themselves in.
Predatory lending refers to when a lender imposes unfair practices on borrowers, and is often accompanied by high interest rates and short repayment terms. In late March, the Federal Reserve and CFPB, among other financial entities, encouraged banks to issue small loans to Americans who are struggling. The announcement was met with criticism, since the Fed didn’t put any protective measures in place when urging banks to issue these small loans.
One type of predatory lending, payday lending, has already faced scrutiny amid the coronavirus pandemic. Payday lending refers to a type of short-term loan that requires no credit check and can help tide people over with small amounts of money, typically $500 or less. However, these loans have sky-high interest rates, typically around 400%, according to the CFPB.
Since the coronavirus pandemic began, payday lenders were able to sidestep regulations banning them from advertising on Google and Facebook by partnering with out-of-state banks, a report from the Wall Street Journal found. To make sure you don’t fall victim to predatory lending, look out for these red flags:
Before you turn to a payday loan or another type of predatory lending, consider the alternatives, such as small personal loans, credit cards with favorable terms, or even borrowing from friends and family. Plus, the LendingTree coronavirus hubpage has plenty of resources for people who can’t pay their debts.