To Defer or Not to Defer My Loan ?
Is a loan payment deferral the right option for me? On the surface, it sounds like a no-brainer. But before you make your decision, make sure you have all the facts and know all your options.
Lois August, Manager of Financial Wellness at American Airlines Federal Credit Union, suggested asking yourself these questions before you request a loan payment deferral:
- Has my household income been significantly impacted?
- Do I anticipate changes to my income?
- Do I have the money available to make this payment?
- If I don’t make this payment, what will I use that money for instead?
- Do I have enough money saved up in an emergency fund to get me through six months?
On a positive note, deferring a payment will not affect your credit score. Loans will continue to be reported to all credit bureaus based on the loan’s deferred due date. Deferred payment(s) will be added to the end of the note.
However, when a payment is deferred, it does not “erase” the payment. You still have to pay it, just at a later date. In addition, deferred payments continue to accrue interest.
Let’s take a look at the different types of loans and what options you might have to defer payment(s). As you look at each of these, remember the questions above and how they may affect each of these loan types.
Consumer loans encompass vehicle (e.g., auto, boat, airplane) loans, lines of credit and personal loans. American Airlines Credit Union made the decision at the end of March to automatically defer all consumer loan payments for 30 days.
After the automatic deferral, Credit Union members will be able to request a one-month deferral at their discretion via a request form within online banking. See our Emergency Relief Information page for more details.
But a deferral is really a temporary fix to buy you more time during what is hopefully a short-term financial issue. If your financial situation requires more than a temporary fix, you might want to consider other options. For instance, on vehicle loans, you might be able to refinance the loan – allowing you to take a new loan with smaller monthly payments.
Real Estate Loans
Mortgage and Home Equity Line of Credit (HELOC) loan deferrals are not automatic; however, they are available by request. See our Emergency Relief Information page for more details.
For more insights about mortgage payment deferrals, please visit the Consumer Financial Protection Bureau (CFPB) website.
If you need to discuss repayment options to keep your student loan account in good standing, please log in to your UAS loan account, send a message or call (800) 723-2210 to speak with a servicing agent. A deferral of three (3) months will be granted to those who qualify.
Other Credit Union Resources:
If you’re still unsure of the best solution for you, please reach out to our Financial Wellness team. “Our counselors and advocates are here to help members understand their options while having to navigate through tough financial decisions,” says Lois August, Manager Financial Wellness.
One of the financial wellness tools available to you is The Navigator. The Navigator is an online educational tool that has up-to-date information on how to handle the current crisis and its impact on your financial health along with tips for staying financially healthy. You can access the web page at Navigator.AACreditUnion.org.
For a free and confidential consultation, contact Financial Wellness at 833-FIN-WELL (833-346-3955) or FinancialWellness@AACreditUnion.org.
Emergency loans, as the name suggests, are for emergencies. They’re intended to help with immediate expense assistance. Consider the interest rate you’re paying for the emergency loan vs. the loan you’re considering paying from it.
Emergency loan rate > Other loan rate = Pay the other loan.
Emergency loan rate < Other loan rate = Use funds from emergency loan to pay other loan.
What’s right for you?
The bottom line is that you have choices and you have a lot of resources at your disposal. Don’t hesitate to reach out for help, guidance or counsel if you need it. American Airlines Credit Union will continue to do our part to support you during these uncertain times. Together, we’ll get through this.