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Understanding Loan Assistance Options

(The information below is intended for general purposes only. Consult your legal or tax advisor to discuss how any loan assistance offered may affect your personal situation.)

The Coronavirus has caused a ripple effect, impacting businesses and the financial stability of many of Sharonview’s members. If the pandemic has you worried about how you'll make this month's loan payments (or any bill, for that matter), know that you have options. Contact your financial institution(s), and even your utility providers as soon as possible. Many, including Sharonview, will work with you during this difficult time.

Here are four main options to consider if you believe making your next loan payments will be difficult:

Forbearance:

Forbearance lets you make reduced payments or no payments for a set period of time, though your loan continues to gain interest during this period. The skipped payments are then due at the end of that designated timeline. In some cases, a financial institution may let you spread those skipped payments out over a few months.

Skip a Pay/Deferment:

Deferment also allows you to skip payments. With deferment, your payments may be due once the designated time period ends, or they may be tacked onto the end of your loan (basically extending your loan term). When your deferment ends, any unpaid interest is added to the amount you borrowed. This is called capitalization. Your increased loan amount then generates more interest, adding to the overall cost of your loan. You can limit the amount to be capitalized by making interest payments during deferment.

Loan modification:

This is a process that allows you to change the terms of your loan. You might be able to extend your loan term or lower your interest rate, thereby reducing your monthly payments, too.

Refinancing:

Refinancing your loan into a longer-term loan or one with a lower interest rate can also help in hard times. Just keep in mind there are closing costs associated with this, though you may be able to roll them into the loan balance. Cash-out refinances can also give you a lump-sum payment that you can use to stay afloat if your income has been reduced.

How do I Get Started?

Contact Sharonview or Your Financial Institution

Our best advice is, if you can pay your loan(s), continue to do so. But if you are experiencing financial hardship because of the Coronavirus, call us or your financial institution immediately to discuss what relief options are available.

To receive the mortgage forbearance through the CARES Act, you must contact your loan servicer. As provided by the Act, there won’t be any additional fees, penalties or interest added to your account through this deferment, but regular interest will still accrue.

Repayment Plans: Getting caught up on past-due amounts

If you’ve missed some of your loan payments due to a temporary hardship, a repayment plan might provide a way to catch up once your finances are back in order. A repayment plan is an agreement to repay the delinquent amounts over time.

How Repayment Plans Work:

• Your financial institution or servicer will spread out your overdue amount over a certain number of months.
• During the repayment period, a portion of the overdue amount is added to each of your regular loan payments.
• At the end of the repayment period, you'll be current on your loan payments and resume paying your normal monthly payment amount.

The length of a repayment plan will vary depending on the amount past due, how much you can afford to pay each month and the repayment schedule. A three- to six-month repayment period is typical.

A Modification Permanently Changes the Loan Terms

A loan modification is a permanent restructuring of the loan where one or more of the terms are changed to provide a (hopefully) more affordable payment.

If you're currently unable to afford your mortgage payment due to a change in circumstances, but you could make a modified payment going forward, this option might help you avoid a foreclosure.

How the Financial Institution Adjusts Your Payment

With a modification, the financial institution might agree to do one or more of the following to lower your monthly payment:

• reduce the interest rate
• convert a variable interest rate to a fixed interest rate
• extend the length of the term of the loan

How Does Deferring a Payment Work?

When you request a loan deferment, you're allowed to temporarily stop making payments on the loan. Typically, you will not have to worry about late payment fees, but it is a good idea is to confirm.

• With an auto loan, your financial institution may refer to the arrangement as a loan extension or a skip a pay. Most financial institutions have different criteria you must meet before they grant the skip a pay. For example, you may need to show that you're requesting the extension due to a temporary setback, the Coronavirus.
• If you're having trouble with mortgage payments, you can contact your mortgage financial institution to discuss your options. One option may be to place your loan into forbearance and temporarily stop making payments or make smaller payments.

Whether it's called deferment, loan extension, postponement or forbearance, continue making your payments until you're certain that your financial institution or loan servicer has approved your application and is allowing you to stop making payments.

Can Deferred Payments Affect My Credit?

When a financial institution approves your skip a pay request, it should report that your payments are currently deferred. While this deferment appears on your credit report, the skip a pay won't help or hurt your credit scores. If you missed payments before putting your loan into deferment, those late payments won't be removed from your credit history.

Will I Still Be Charged Interest During Deferment?

In most cases the answer is YES.

Depending on the arrangement, you may add additional loan payments to the end of your loan's term, or your monthly payment amount may increase. In either case, you wind up paying more overall than if you hadn't deferred your payments.

For mortgages, you may have to make a large lump-sum payment for the entire amount past due that accrued during the forbearance. This can include the missed loan payments, interest, taxes and insurance.