debt management plan

Whether you currently have a forbearance on your mortgage, student loan, or credit card, you’re going to have to pay it off when the forbearance ends. Start planning now, so when that date arrives, you’re ready to tackle the payments you missed.

The first thing you should do is sit down and take a look at your overall finances and make a budget. This will help you determine what method of repayment will work best for you. Next, know what your options are for paying your forbearance balance and decide which repayment plan will work the best within your budget.

Mortgage Repayment Options

There are several paths to take when deciding to pay back your forbearance balance. A repayment plan adds a portion of your forbearance balance to your regular monthly mortgage payment until it’s paid off. For example, if your mortgage payment is usually $1,500, you can pay $2,000 to work toward paying it down.

The reinstatement option means you pay one lump sum to cover your forbearance balance and then resume your regular monthly mortgage payments. This may not be an option for everyone, so rest assured that under the CARES Act, lenders cannot require you to repay your forbearance balance all at one time.

With a deferral or partial claim, you can defer the forbearance balance until you have paid off your mortgage, or your loan payments will be put into a junior lien, which is repayable when the owner refinances, sells, or terminates their mortgage.

If you still can’t afford your mortgage payment due to hardships, you can apply for a loan modification, which is a service that lowers the interest rate or balance of a home loan or extends the terms so that monthly payments are more affordable.

It’s understandable that with the pandemic still impacting employment and financial stability, people are still struggling. As long as you have been in COVID-19 forbearance prior to Feb. 28 of this year, homeowners with conventional loans can request an additional three-month extension for a total of 15 months, while homeowners with government-backed loans as of June 30, 2020, have the option to request two additional three-month extensions for a total of 18 months forbearance.

Student Loan Repayment Options

If at any time during forbearance you are able to pay on your balance, you should try to do so. It will benefit you in the long run. However, there are several ways to pay down student loans when your term ends. One way to bring down payments is to refinance, but only do so if you want to take advantage of fixed interest rates to lower your APR and monthly payment, and only if you’re financially stable.

If you’re unable to pay your forbearance in one lump sum, it will be added to your loan balance. However, if you find you’re still having a hard time making payments toward your student loan you can apply for a deferment. During this time, interest on federally subsidized loans will not accrue, while any interest on unsubsidized loans will be added to your loan.

Credit Card Debt Repayment

Credit card forbearance may have been the reprieve you needed during a difficult time, but it is only a temporary one. Although you haven’t been making payments toward your credit debt, interest has still been accruing. And, if you were, and still are, using your card, so has your balance. This could mean you’re in more credit card debt than you were before. If you can’t begin making payments when forbearance ends, the credit lender may mark you as delinquent, which can negatively affect your credit score. While there are various techniques for repayment you can apply, it also might be time to look into a debt management plan. Credit counselors will work with you and your credit card companies to consolidate your debt, lower your interest rate, and create a monthly payment that is affordable and customized to your specific situation.

A debt management plan isn’t a solution for mortgage payment issues or other secured loans, but for unsecured loans like credit cards and student loans, it can be the way you regain your financial health. Whether the forbearance helped you come out of financial hardships, or you’re still struggling, having a plan of action for when the forbearance ends will keep you from losing ground, giving you the means to become more economically stable. 


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