Saturday, June 27, 2020

Americans Skip Millions of Loan Payments as Coronavirus Takes Economic Toll

In high-cost areas, jobless benefits aren’t enough to help debt-laden borrowers pay down their bills

By AnnaMaria Andriotis of The WSJ. Excerpts:
"Americans have skipped payments on more than 100 million student loans, auto loans and other forms of debt since the coronavirus hit the U.S., the latest sign of the toll the pandemic is taking on people’s finances.

The number of accounts that enrolled in deferment, forbearance or some other type of relief since March 1 and remain in such a state rose to 106 million at the end of May, triple the number at the end of April, according to credit-reporting firm TransUnion.

The largest increase occurred for student loans, with 79 million accounts in deferment or other relief status, up from 18 million a month earlier. Auto loans in some type of deferment doubled to 7.3 million accounts.  Personal loans in deferment doubled to 1.3 million accounts.

The surge in missed payments suggests that the flood of layoffs related to the coronavirus has left many Americans without the means to keep up with their debts. Many people have used up their stimulus checks, and unemployment benefits in high-cost areas aren’t enough to replace paychecks or to help debt-laden borrowers pay down their bills.

In some cases, the government is instructing companies to let borrowers defer their loans. The stimulus package signed into law in March, for example, allowed most borrowers to stop making monthly payments through Sept. 30 on federal student loans.

The stimulus package also allowed homeowners hurt by the coronavirus or its economic fallout to ask their mortgage servicers for permission to pause their payments for up to 12 months. If the mortgage is backed by the government, the mortgage servicer is generally supposed to grant the request."

Many credit-card, auto-loan and personal-loan lenders continue to allow consumers to skip or pause payments, in hopes of buying time for the economy to recover and for consumers to get back on track with their payments."

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