As millions of Americans deal with reduced income, paying important bills has become a major worry. Wave nine of our Consumer Financial Hardship Study found that over a quarter of financially impacted Americans are concerned about being able to make their car payments. Auto loans don’t have the same CARES Act accommodations guaranteed by the government like some mortgages and student loans do. However, many private auto lenders are offering payment plans for those in financial hardship.
What auto lenders are offering
Accommodations will vary by lender, so be sure to contact yours to get specifics. When we reviewed 10 of the nation’s top auto lenders who are offering financial assistance, we found typical plans include deferred payments or waived late fees. To better understand the terms of what your lender is offering, ask if interest will accrue during the paused payment period. You should also find out how you’ll need to handle delayed or paused payments when the plan period is over. Some plans add the missed payments to the end of the loan.
Accommodation eligibility for auto loans
Lenders determine eligibility for auto loan accommodations on a case-by-case basis. They may require proof of hardship, like unemployment documentation, to approve the plan. Lenders may also limit qualification to accounts where loans aren’t already in default. But don’t assume that that you’ll automatically be disqualified for any number of reasons. Talk to your specific auto loan lender about any questions you have.
Before accepting an accommodation, such as deferred payments, make sure you fully understand the terms. This can help you be confident the new payment plan makes sense for your household budget. The Consumer Financial Protection Bureau recommends getting the agreement in writing.
You should also find out how your lender will report the paused payments to the credit reporting agencies. Lenders can choose to report deferred accounts in different ways. For example, TransUnion records indicate the majority are adding a natural disaster code to your account. Once you know how your lender will report your account, consistently review your credit reports. This will help you check your accounts are being reported as expected. You can get a free credit report online as often as every week from each of the three nationwide credit reporting agencies through April 2021.
We understand it can be difficult to makes sense of financial accommodation plans, especially since private lenders can all have different terms and requirements. But don’t be afraid to ask questions and get the help you need. Wave nine of our study revealed that 14% of those with auto loans have already enrolled in a financial accommodation plan. Continue to advocate for yourself as you do your best to manage your household finances and credit health during this time.
Find additional information on forbearance plans and your credit for the following loan types: