It’s already back-to-school time here in Georgia and throughout 2024 it seems student loans have grabbed most of the headlines given the current administration’s efforts to roll out sweeping loan forgiveness programs.
Current Conditions
Meanwhile, millions of Americans are struggling to keep up with mortgage payments and repay auto loans – no surprise given recent economic conditions of inflation coupled with higher interest rates. Edmonds cited an average interest rate of 7.3% for new car loans in the second quarter of 2024, with an average monthly payment soaring to an all-time high of $740. According to Cox Automotive, car repossessions have spiked 23% since last year and risen 14% from pre-pandemic levels.
On the mortgage side of things, financial pressures such as higher unemployment, lower personal savings, sharp increases in property taxes and insurance, and a noticeable uptick in credit card debt are pushing the rates of mortgage delinquency (loans at least one payment past due but not yet in foreclosure) higher compared to a year ago.
Multiple Choice(s)
Many of those currently struggling may not realize there are options to ease their financial burdens BEFORE facing repossession or foreclosure. Hardships such as excessive debt obligations, illness/injury and job loss can qualify borrowers for loan modification.
Not to be confused with refinancing – which replaces existing loans with an entirely NEW loan – loan modification involves negotiating with lenders to make changes (either temporary or long-term) to current loan terms that lower monthly payments. These modifications can take several forms including:
- a loan term extension (e.g., increasing a 30-year mortgage to 40 years);
- a temporary or permanent reduction in interest rate; or
- a temporary ‘pause’ on monthly payments.
While a loan modification can negatively impact credit scores, it is a much more desirable option to foreclosure or repossession.
Doing the Math
Even if you’re not currently behind on loan payments, if it’s taking extraordinary measures to stay current on payments or if you foresee some financial pitfalls in the future (e.g., major car/home repairs, change in employment status) a consultation on proactive measures – such as loan modification – can replace a stressful, ‘fingers-crossed’ approach with a thoughtful strategy.
So, if you’re looking for some ‘after-school help, ’ my legal, financial, and real estate background, coupled with extensive negotiating experience, make me your ideal tutor. Don’t wait until the bank takes your home or car when help is just a call or text away.