How to Get a Principal Forbearance

Forbearance agreements can stop foreclosure.

The principal on a loan is the amount borrowed, or the balance on the loan. Forbearance is a special program offered by lenders allowing a debtor to skip payments on a loan, including the principal. Finance charges continue to accrue during forbearance, but the option to skip payments for a few months may prevent foreclosure or repossession for some people. Lenders usually consider forbearance only when a debtor is suffering from a temporary hardship, such as a job loss or illness.

Instructions

1. Gather documentation to support your request for forbearance. Qualifying documents may include a job termination notice or hospital bills. The documentation can apply to you or your spouse -- if your spouse’s situation is affecting your ability to pay the debt.

2. Contact the lender. Call the customer service department at the telephone number listed on your billing statement. Tell the customer service representative you are struggling to make payments and would like to discuss available options.

3. Describe your problem to the lender. What happens next depends on the type of loan you have. A credit card company or automobile credit agency may immediately agree to allow you to miss a single payment based on your situation as you described it. However, a mortgage company may request written proof of your predicament. A car credit agency may allow forbearance on the principal, but request that you pay the finance charges.

4. Provide all information requested by the lender. The lender may initially gather information over the phone about your financial situation by asking for a list of all your debts, as well as other obligations, such as utility payments.

5. Fax or mail written documentation to the lender, if requested. After approval, sign and return any paperwork sent by the lender. Pay finance charges if asked to do so while skipping payments on the principal through the duration of the agreement.

Tips & Warnings

• It’s best to contact the lender even before you need to ask for forbearance. Giving the lender a head’s up about potential financial problems because of a job loss or medical problem shows the lender you’re looking ahead and managing your debt responsibly. Consider other options after forbearance. Forbearance may offer some breathing room for a few months, but is only a temporary solution. During the forbearance period, consider loan modification to make your mortgage more affordable with lower monthly payments or try selling a car that you really can’t afford. Explore debt consolidation loans to reorganize credit card debts.

• Forbearance agreements are not automatic. Lenders may check credit or past payment history as part of the approval process. Regardless of credit score,

References

• MSN Money: A Mortgage You Can't Afford?
• Hope Now: Homeowner Unemployment Resources