In the past week the number of Americans applying for welfare has hit a record high 6.6 million, as the strict measures imposed to curb the spread of coronavirus forces businesses to close and accelerates unemployment. During the 2007 – 2008 recession – the worst in recent history – where 8.7 million jobs were lost, just 665,000 applied for unemployment benefits, which should shed light on the severity of the current economic situation.
Economists are fearing the worst, and are predicting that America should brace for jobless claims to continue escalating. Some analysts believe that the unemployment rate could reach as high as 40 percent in America in the second quarter, which is much higher than its peak of 25 percent during the Great Depression. Globally, the economic downturn could be especially deep and lengthy, with recovery damaged by continued anxiety over the highly infectious disease which has to date killed over 73,000 and infected more than a million. The US president, Donald Trump, has declared a national state of emergency, and congress has approved an $8.3 billion emergency program to fund health efforts to contain the epidemic. But what of the financial distress of the American public, who are already struggling to pay back loans on houses and cars, feed their families, and cover basic utility bills?
In Italy, which has been the country worst hit by the virus, any public and private debt obligations including housing rent and interest payments have been suspended, as Italy slams on the brakes and forces the country to completely halt until COVID-19 slows down. In America, where the impact of coronavirus on the financial health of the country is already staggering and where people are being forced to go on sick leave or lose their jobs altogether, the Federal Reserve has shown that it will do anything within its power to support the economy and provide liquidity at a time of huge economic uncertainty. It has moved to stabilise financial markets, cut interest rates close to zero, reduced bank reserve requirements to zero, bought corporate debt, and extended emergency credit to nonbanks. From a fiscal perspective, it has made direct payments of up to $1,200 to individuals, increased welfare benefits, and provided hundreds of billions of dollars in loans and grants to get the American people through this challenging period of time and to keep the economy afloat.
Last week, the U.S. Department of Education Secretary announced that student loan borrowers could put their monthly payments on pause for at least 60 days during the coronavirus outbreak, and this week the Bank of America announced it would allow borrowers to pause mortgage, credit card payments for the duration of the coronavirus outbreak. But many are wondering, what is being done in terms of loan relief for people paying off cars? In recent years, millions of people have applied for cheap car loans in America, only to find that now they are unable to pay them back until lockdown is lifted. The good news is, many lenders are addressing the issue to help customers with their repayments.
Automakers are setting up programs to allow borrowers to defer or pause their loan payments if they have been financially impacted by the coronavirus pandemic – but for the time being it comes down to which bank or auto provider your loan is with. Ally auto insurance provider, for example, has announced it will defer payment for existing auto customers for up to 120 days without incurring late fees or finance charges, and will give new auto customers the option to delay first payment for 90 days. KeyBank will allow existing customers to defer payments for 90 days on auto loans upon request, and many other banks and lenders are following suit. Maserati is waiving late fees and offering 90-day payment due-date extensions and lease extensions of up to six months, while Mitsubishi Motors is allowing owners to defer payments for up to 120 days if they’ve financed through Mitsubishi’s financial partner. Ford, Nissan, General Motors Co and Toyota have also said they will provide payment relief options to people affected by the virus, including extensions and deferred lease payments.
For the 7 million Americans with car loans who have already found themselves in a position where they are struggling to repay that loan, the best approach is to contact the loan provider to see what options are available for deferment. The car loan may be from a bank or other financial institution, or it may be a finance arrangement through a car dealership. Whatever it may be, speaking with the relevant financial provider will shed light on the options available and will alleviate customer’s stress and worry, temporarily at least.