By : Aahoo Pourang
The COVID-19 pandemic has brought economic uncertainty throughout the US. Although we’re a few months in to the ‘social distancing’ measures taken by state governments and moving in and out of phases of re-opening, there is still little understood about the CARES act signed by President Donald Trump on March 27, 2020. Other than withholding payments for mortgage, consumers and small business owners must be aware that there is more to the act than withholding payments for a set period of time.
Not only must borrowers be extra vigilant about protecting their identity in the current economic era, but they must also be consistent in checking updates on any new loans under their name. Because identity theft and scams spike during times of crisis, some borrowers are protecting themselves by freezing their credit. The only true solution to the uncertainty swirling in headlines is to communicate with creditors and lenders for clear and defined information on deferred payments for your small business or personal loans.
Entering into a forbearance may not negatively affect your credit, because a portion of the CARES act has amendment instructions to lenders, specifically to COVID-19, to report current on a borrower’s credit obligation. However, borrowers shouldn’t assume their lender is following the recent guidelines, which is why it is essential to verify with your lender to continue reporting your account as current.
A major issue that arises, especially when it comes to the new COVID-19 CARES act, is when mass amounts of misinformation in the news or general media become the primary source of economic information (or misinformation). There are a few issues at hand that must be consulted with your creditors and/or lenders for your post-pandemic loan.
One of the problems that may appear on your small business or personal loan, is if payments are due immediately after forbearance. Because your mortgage is paused temporarily, it doesn’t mean you received free money. Everything owned must be paid back immediately once the forbearance period ends.
Another issue is with payment reductions due over 12 months: when your monthly payments are reduced for a given period of time, your arrangement will come to an end, and you have to repay skipped portion of payments with a 12-month time frame. Keep in mind if your mortgage servicer allows you to pause payments for a year, delayed payments are due at the end of the loan.
Because the average borrower may have a knowledge gap in understanding the new CARES act, it is crucial to protect your identity, and take the initiative to communicate your concerns with your lender