Forbearance, deferment: What’s the difference?
If you have a home loan, student loan or credit card debt and are considering suspending payments to creditors because you’re financially struggling, you should know the difference between forbearance and deferment.
Deferment is when you come to an agreement with your creditor to freeze payments for a period of time. The money you don’t pay now will be added to the end of your loan.
For example, if you choose a 90-day deferment on your mortgage, you won’t have to pay anything toward your mortgage for the next three months but then the life of your loan will extend by three months on the back end of the loan.
On the other hand, forbearance is an agreement you come to with your lender where the lender agrees to accept reduced payments or no payments at all for an agreed-upon time. When the period ends, the borrower starts repaying the regularly scheduled payments.
You must also pay the amount you didn’t pay during your payment break. You can do this by either paying a lump sum or in monthly installments over 12 months. If you choose the monthly options, the catch-up payments will be in addition to the regular monthly payments.
One good thing about the deferment is, according to Experian, additional interest and fees don’t accrue during the payment break. However, a forbearance involves the possibility of interest and fees being tacked on later.
While a deferment request will probably appear on your credit report, Experian reports that a deferment will not be accompanied by any negative marks on your credit report.
Forbearance also isn’t supposed to hurt or benefit your credit score; however, mortgage lenders have the right to report missed payments. If that happens, forbearance could negatively impact your credit score.
We are undoubtedly in uncharted territory due to the economic fallout caused by the coronavirus pandemic, so the best thing to do is work with your lender to find a good solution to helping you get through these uncertain times.
ROBOCALL UPDATE: Junk calls have become such a huge annoyance. Readers frequently ask how to stop getting inundated with robocalls. For years, these calls weren’t too big of a hassle because the National Do Not Call Registry worked well. Legitimate companies were generally compliant with the laws and if they did break the law, the fines were heavy.
But then robocalls started exploding in the last few years, with nearly 59 billion robocalls logged in 2019. The Federal Communications Commission has been encouraging the telecommunications industry to develop a solution to stop robocalls and spoofed calling numbers since 2014. Now the FCC has issued a new mandate for all voice service providers to have robocall-fighting “STIR/SHAKEN” technology in place no later than June 30, 2021.
STIR/SHAKEN are acronyms for the Secure Telephone Identity Revisited (STIR) and Signature-based Handling of Asserted Information Using toKENs (SHAKEN) standards. In a nutshell, this technology is supposed to authenticate that calling numbers are not spoofed and that the call actually originates from the number you see displayed. Unfortunately, these two technologies won’t outright block the robocalls.
In the meantime, if you haven’t already checked with your wireless carrier you may want to because most now offer free products to help cut down on robocalls. AT&T has a product called Call Protect, Sprint has Call Screener, T-Mobile has Scam ID and Scam Block and Verizon uses Call Filter.
DON’T BE A MONEY MULE: The FTC has recently warned consumers to avoid moving stolen money for scammers because if you help them, you could be in trouble. When you help a scammer move money around this is what law enforcement calls a money mule. Several ways crooks elicit your help is through online dating, work-at-home jobs or prizes.
It starts with a scammer sending you a check and then asking you to send some of the money to someone else. Usually they ask you to either send a gift card or wire transfer because it’s virtually impossible to recoup your money once the ruse has been uncovered.
If you deposit the scammer’s check, it may take some time before you find out the check is fake. The bank, of course, will want you to repay the money even if you end up giving some of it back to the scammer. Also, if you give the scammer your account information, they may have access to your account and try to initiate money transfers before you catch on.
To avoid money mule scams, don’t accept a job that asks you to transfer money. They may tell you it is for a client or supplies but firmly say no. If you are told you have won a prize, never send money to collect a prize. This is always a scam and a way to get you to move stolen money. Don’t ever send money to an online love interest even if they have sent you money.
Criminals are very good at making up stories to get you to help them. But don’t do it. Resist the temptation to be caught up in a scandal. If you think you might be involved in a money mule or money transfer scam, stop transferring the money and notify your bank immediately. You can also report these types of solicitations to the Federal Trade Commission at ftc.gov/complaint.
Remember: I’m on your side.
If you have encountered a consumer issue that you have questions about or think our readers should know about, please send me an email at email@example.com or call me at 208-274-4458. As The CDA Press Consumer Gal, I’m here to help. I’m a copywriter working with businesses on marketing strategy, a columnist, a veterans advocate assistant and a consumer advocate living in Coeur d’Alene.