Are you finding it difficult to make your monthly payments on time? You’re not alone. It’s no secret that many of us are dealing with reduced or limited income as a result of the pandemic. While we’re all doing the best we can with the resources we have, defaulting or missing an important due date can cause serious problems down the road because your payment history makes up 35% of your credit score.
As a result of the pandemic and the extra financial strain it’s caused, big banks, lenders and even the government are stepping up to offer financial relief for people who are struggling to make payments on time. Payment deferral programs are just one of the many tools that could be useful in lessening your financial burden in the short term.
What Is A Payment Deferral Program?
Payment deferral programs are meant to be used as a short-term solution to a current financial problem. They allow you to delay your payments to a future date, and although a mortgage deferral is the most common, requests can also be applied to monthly bills, lines of credit, auto loans or other types of loans.
While it may sound like the ideal solution, it’s important to remember that this program doesn’t simply freeze your payments. Even though you won’t have to pay them up front, they will continue to accrue interest while deferred and the amount will be added to the final balance owing. It’s also worth noting that there may be qualification requirements, so you’ll need to contact your lender and apply to learn more.
Does Deferring A Payment Impact Your Credit Score?
Equifax® has been working with lenders to ensure that deferred payments don’t impact your credit profile. More specifically speaking, if companies choose to implement a payment deferral program, Equifax has asked that they don’t incorrectly report missing payments to credit bureaus which could negatively impact your credit score.
However, with a record number of requests coming through, there’s always the potential for mistakes to happen. Should you choose to pursue a payment deferral, don’t be afraid to ask for clarification on certain procedures and double check the paperwork for any clerical errors.
How Should You Move Forward?
If you’re interested in pursuing a payment deferral program, being prepared is a very important piece of the puzzle:
- Move forward with a clear payment schedule that works with your budget
- Record details on how the deferral payment was arranged (including the date and name of the customer service representative you spoke with)
- Request written or email confirmation that the payment was deferred successfully
- Check your record to make sure the payment was recorded properly
Remember, before you make any big decisions that could further impact your financial situation, it’s important to put together a short-term budget and learn more about all available support provided through the government and your personal lender so you can make the choice that’s best suited for your personal financial needs. Contact us to learn more about your options and how payment deferrals may help.