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If you and your family have been affected financially by the coronavirus pandemic, here’s what you need to know.
With the COVID-19 outbreak continuing to worsen across the U.S., states are issuing shutdown and stay-at-home orders en masse. These restrictions, while deemed necessary by public health officials and epidemiologists, have also had a huge impact on the economy.
Many employers have responded with layoffs, furloughing employees, cutting hours or even permanently letting people go. A record 3.3 million people filed for unemployment, the most in U.S. history.
If you’re currently paying off a vehicle, that might put you in a tighter spot than most — especially if you have other debt burdens, like student loans or a mortgage. Even if your income hasn’t yet been affected by the crisis, the impending economic fallout of this pandemic could have far-reaching consequences for even the most financially secure Americans.
Thankfully, many lenders have begun to offer deferment programs for financially vulnerable borrowers. Here’s what you can do if you’re struggling to stay current on your auto loan.
First, visit your lender’s website and see if they have a special link directed at those whose livelihood has been affected by the Coronavirus outbreak. This should take you to a page describing any special considerations or benefits the lender is currently offering borrowers. Some will let you sign up for these special programs online, while others require that you call to enroll.
If you don’t see anything specific on their website, call the lender directly. Like other customer service hotlines, hold times may be longer than normal — so be prepared to wait.
It’s crucial to call before you miss a payment. Most lenders are understanding and willing to work with their customers, but some options may only be available to borrowers who are current on their bills. If the due date has already passed, it’s still a good idea to call. Establishing a line of communication with the lender shows that you care about paying your bills.
Every lender will have different rules dictating what they’re able to offer. Some deferment or assistance opportunities may be dependent on your employment status, while others will be available to everyone.
Many lenders have already created assistance programs for customers affected by the pandemic.
Ally Bank is offering current customers up to 120 days’ worth of payment deferrals. Interest will still accrue during this time. Go to your online account or call Ally directly at 1-888-925-2559 to enroll. It’s not clear if this will be available for new customers who take out a car loan.
Bank of America is also letting auto loan borrowers defer payments, which will be added to the end of the loan. It’s not clear how long borrowers will be able to defer payments. Customers will need to request this through the Bank of America customer service line at 1-844-892-6002.
Many lenders are offering deferment for customers on a case-by-case basis. Wells Fargo announced it has payment deferment and other assistance options for auto loans, but details have not been made public. Customers need to contact Wells Fargo directly to see what’s available to them.
If your auto loan is with a local bank or credit union, they may not have anything listed on their website right now. Contact them directly to ask if you can defer payments. Even before the Coronavirus outbreak, many had assistance programs for unemployed or otherwise financially vulnerable borrowers.
The National Credit Union Administration is encouraging credit unions to offer loan modification programs, which means extending the loan term or lowering the interest rate.
If you’ve recently refinanced with RateGenius and are unable to make a payment on your car loan, you’ll need to contact your new lender. However, we’re here to help if you need assistance finding the contact information for your bank or credit union. You can reach us at 866-728-3436.
If you’re in the middle of the car loan refinance process, reach out to your loan officer to discuss next steps.
Borrowers who took out an auto loan from the manufacturer may also be able to defer their payments. These include:
If you were already in the market for a new vehicle when the Coronavirus outbreak started, you don’t necessarily need to put those plans on hold. New borrowers may still be eligible for payment deferment programs similar to those offered to current borrowers.
Some car companies are offering payment deferrals for new customers. This means if you buy a car, you won’t owe a payment immediately. Deferment lengths will vary based on the automaker.
These companies include:
If you still have a job and want to take advantage of the current low interest rates, it may be a good time to refinance your auto loan. Refinancing can reduce your monthly payment if you qualify for a lower interest rate or extended loan term. Plus, your first payment on your new loan isn’t due for 30 to 90 days (depending on your lender), giving you a temporary break from payments.
Extending the term will result in a lower monthly payment, but it may also increase the total overall interest paid. The right answer to this trade-off will vary by individual and largely depend on how financially vulnerable you are at the moment.
On the other hand, it may be worth having a lower payment right now even if it will increase the total interest paid. You can always make higher payments in the future if you can afford to do so, but for now it’s a good idea to free up funds for other necessities.
Keep in mind that lenders will still be requiring proof of employment or proof of income, among other requirements, so have those documents ready when you apply. You can review what you need to qualify for car loan refinancing right here.
If your auto lender isn’t allowing customers to defer loans, see if you can find some relief from your other loans.
If you own a home, your mortgage lender may be offering deferment. If you’re a renter, see if your landlord will let you skip this month’s rent or pay less than you would normally. In both these cases, you could use funds set aside for your mortgage or rent payment to pay your auto loan.
If you have a CD at a bank that’s still maturing, you may be able to close it early without paying any extra fees.
Many cell phone, utility and internet providers may also be lowering or deferring payments during this time. You’ll have to contact each of these individually to sign up.
The options available to you during this health and economic crisis largely vary based on your lender. But one piece of advice applies to everyone: call before you have a major problem.
Figuring out your options is much easier before you’ve missed a payment. Many lenders are offering new programs every day so even if yours isn’t on the list, it doesn’t mean they won’t work with you.
This advice also applies to any other loan or bill you have. See if you can get on a budget plan or discounted rate. The greater your cash flow, the easier it will be to tackle the most important bills.
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