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Old 05-21-2020, 06:38 AM
MikeF is offline
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Delay loan payments?


I've seen it proposed that lenders (credit card companies, auto lenders and mortgage holders, in particular) give borrowers a three month reprieve and add the payments to the end of the loan period. On it's face, this seems like a good idea but I'm sure its not that simple. What are the down sides?
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Old 05-21-2020, 08:32 AM
dalej42 is online now
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The loan company gets extra interest as well as avoiding negative publicity on social media. What’s not to like?

Yes, you’re paying more in interest but probably less than the late payment fee.
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Old 05-21-2020, 08:53 AM
VOW is online now
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Before even attempting to using this tactic, contact the lender immediately. Ask about the policy, the pros and cons. Ask if skipping these payments will affdct your credit rating.

Most important, get the plan detailed in a letter, and keep it with your important papers until the loan is paid in full.


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  #4  
Old 05-22-2020, 09:50 AM
MikeF is offline
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I'm not thinking about doing this myself. Just wondering what obvious things I'm missing as to why this can't be a nationwide policy.
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Old 05-22-2020, 12:03 PM
Corry El is offline
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Quote:
Originally Posted by dalej42 View Post
The loan company gets extra interest as well as avoiding negative publicity on social media. What’s not to like?

Yes, you’re paying more in interest but probably less than the late payment fee.
I think most people would envision this as taking the next 3 $1000 (just as example payments on a new 30 yr mortgage) in May, June and July 2020 and making those 3 $1000 payments due around 30 yrs from now, not 3 special payments of ~$3000 each added to the end (if you gross up $1000 at 3.75% pa over 30 yrs, roughly). The first case is hitting the lender with roughly $2000 present value loss (on approx $216k mortgage, $1/mo at 3.75% 30 yrs).

This effect would be obviously be much smaller on a shorter term loan, and isn't gigantic, but I'm sure borrowers would expect to make the same total in payments a little later on average, not to pay more, later.

Lender would also have to consider that they might never get the money at all if they don't make the concession, or have to take action (collection, legal) to get the money that also costs money. But as to why lenders might not want to do this for *everyone*, including those capable of paying on time, I think it might explain.

Like proposed or virtually enacted* rent holidays, there is an issue that not literally everyone needs it, and it's a value judgement whether people who promised to pay something and can do it should be allowed not to because there's COVID. Also some people view those paying money on loans or rent as in a strictly superior moral position to those receiving it. Not everyone does.

*In NY, Housing Court is not accepting new actions by landlords indefinitely. That is interpreted by many tenants, even who *can* pay, as 'you're a sucker to pay'.

Last edited by Corry El; 05-22-2020 at 12:07 PM.
  #6  
Old 05-22-2020, 03:44 PM
Little Nemo is offline
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I think it's likely that the credit card companies, auto lenders and mortgage holder that are going to see a three month gap in their incoming payments will respond by laying off a bunch of their employees. So this plan would see more people joining the ranks of the unemployed.
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