“I was given a 3 month forbearance so I am all set”
Are you?
Do you really understand what a forbearance is and how it works?
What a forbearance is:
An agreement between you and your lender for the lender to accept reduced or no payments for a short period without the loan going into default.
Does forbearance hurt your credit score?
Generally, no. But it depends on your agreement.
Can I cancel a forbearance?
Generally, yes. But, this is a question you want to ask before accepting a forbearance agreement. And, it is not as simple as just resuming payments. You must ask for the forbearance to be cancelled.
Sounds great! What is the downside?
At the end of the forbearance period the accumulated interest will be added to the principal of the loan. This means that monthly payments will be higher.
You may have to pay a fee to apply for a forbearance.
|Watch out for lump sum forbearance agreements. The lump sum means that the total of the amount put into forbearance will be due when the forbearance period expires.
If possible, see if there is an option for deferment. In this case the payments are still paused and the interest is added to the principal, but there is no lump sum payment at the end.
The key takeaway is to READ THE FINE PRINT. Ask questions and make sure you understand what you are really getting yourself into. There is no standard for forbearance agreements so it tends to come down to what you and your lender agree upon.