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A pandemic, a motel without power and a potentially terrifying glimpse of Orlando’s future

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KISSIMMEE, Fla. — Rose Jusino was waking up after working the graveyard shift at Taco Bell when a friend knocked on her door at the Star Motel. The electric company trucks were back. The workers were about to shut off the power again.

The 17-year-old slammed her door and cranked the air conditioning as high as it would go, hoping that a final blast of cold air might make the 95-degree day more bearable. She then headed outside to the motel’s overgrown courtyard, a route that took her past piles of maggot-infested food that had been handed out by do-gooders and tossed aside by the motel’s residents. Several dozen of them were gathered by a swimming pool full of fetid brown water, trying to figure out their next move.

The motel’s owner had abandoned the property to its residents back in December, and now the fallout from the coronavirus pandemic was turning an already desperate strip of America — just down the road from Disney World — into something ever more dystopian. The motel’s residents needed to pay the power company $1,500.

“This is the third time they’re back here!” one man fumed as the power company workers, protected by sheriff’s deputies, pulled the meters from the electrical boxes. “The third!”

“We a bunch of sorry ass men!” shouted a former felon who had served prison time on cocaine and battery convictions. “If our kids go without light, it’s because of our sorry asses.” He castigated his neighbors for spending their stimulus checks on drugs and alcohol, and then peeled a $20 from a three-inch stack of cash.

“Who else? Who else?” he called out as he dropped the bill on the sidewalk. “We need money!”

Soon the pile was growing, and the Star residents who gave were angrily accusing those who hadn’t of freeloading. “Nobody trusts nobody,” yelled a woman in a tank top and red pajama pants who tossed a $50 bill onto the sidewalk.

“I paid my rent,” shouted someone, who tossed in a $10 bill.

An elderly woman covered in bedbug bites threw $1.88 into the pot. “It’s all I got,” she said.

They were still $525.12 short.

Rose hung on the edge of the crowd, thinking about the $40 she had stashed in her bedside table. The motel she called “hell on earth” and “this malnourished place” had been her home for the past nine months.

She worried about her 65-year-old grandmother, who had chronic obstructive pulmonary disease and needed power for her daily oxygen treatments. She worried about her mother, who suffered from bipolar disorder and was forgoing her medicine to save money. She worried about her neighbors, whose tempers were already frayed by the stress of the pandemic, joblessness and boredom. Gunshots at the motel were becoming a regular occurrence. The power company had cut off the motel two times earlier in the summer. Rose knew that no electricity made everything worse.

She walked back to her room for the $40, threw it on the pile and headed to another shift at Taco Bell.

When she returned home in the evening, the power was back on, but she knew it wouldn’t last long. The next bill, which included unpaid charges going back to March, was for $9,000 and it was due in five days.

The aging motels along Florida’s Highway 192 have long been barometers of a fragile economy. In good times they drew budget-conscious tourists from China, South America and elsewhere, whose dollars helped to pay the salaries of legions of low-wage service workers; the people who made one of the world’s largest tourism destinations — “the most magical place on earth” — run.

In tough times, the motels degenerated into shelters of last resort in a city where low-income housing shortages were among the most severe in the nation and the social safety net was collapsing. Now they were fast becoming places where it was possible to glimpse what a complete social and economic collapse might look like in America.

The pandemic had heaped crisis on top of crisis. The 2008 housing collapse and recession had caused the tourist market to tank at the exact moment the foreclosure crisis was forcing thousands of homeowners and overburdened renters from their homes. Struggling motel owners began renting rooms to the only customers they could find, those who had no place else to go.

In the decade that followed, the tourists returned to Orlando by the millions. Executive salaries at companies such as Disney and Universal soared. So did local real estate prices, buoyed by a booming market for gated, luxury vacation homes.

But almost nothing was done to address the reality that many service workers had emerged from the recession saddled with stagnant wages, bad credit or eviction records that made it nearly impossible for them to rent an apartment and return to a normal life. Many spent much of the past decade stuck in motels with restful names — the Paradise, the Palm, the Shining Light, the Star, the Magic Castle — that belied an increasingly grim reality for both the owners and tenants who found themselves trapped together.

At the Palm, scars of the past recession and the current collapse were evident in the motel’s cramped lobby, which was full of broken air-conditioning units and mattresses stacked to the ceiling. A dozen loaves of donated, day-old bread sat on a table by the front door.

Next door at the Paradise, a leak in the roof had caused black mold to bloom across the walls of one of the rooms. Cockroaches scurried across the floors of others. At the motel’s front desk, a sign warned guests that “due to shortages” there was a charge for toilet paper: $1 a roll.

“We can’t afford to fix anything right now,” the clerk confided.

The owner, who had emigrated from Bangladesh, complained that more than three-quarters of his 40 guests were weeks or months behind on their room bills. Many had jobs or were collecting unemployment insurance, he said, but were refusing to pay because they were protected by the state’s eviction moratorium.

“This kind of business never brings good people,” the owner said, “only bad people.”

Up and down the highway, motel owners told the same story of mounting bills, customers who couldn’t or wouldn’t pay for their rooms and buildings that were slowly falling apart because there was no money to fix them.

The Star Motel’s owner abandoned the property in December. Residents have been left to run the place. MUST CREDIT: Photo for The Washington Post by Eve Edelheit

The worst of them all was the Star. A six-foot-high wall of trash bisected the parking lot, and children rode their bicycles through big puddles of raw sewage that spilled from a broken pipe. When Rose’s family landed at the motel earlier this year, after a few years in a house followed by a string of increasingly dilapidated motels, she felt as if she had hit “rock bottom.” The hot water didn’t work, and the toilet was clogged with hypodermic needles and crack pipes, she said. Rose’s grandmother and her 12-year-old brother, J.J., shared one bed. Her mother and stepfather took a second bed. Rose had a mattress to herself.

Rose’s grades suffered, she got into a fight at school and was suspended from her high school’s JROTC program, which had been a source of stability and pride in her life.

In April she started a gofundme account, hoping it might help her escape the Star. “Moving from hotel to hotel just want to be stable with my family,” she wrote in her pitch. But it drew no donations.

A few weeks later, she moved into an abandoned room near the front of the property that cost her $100 a week. Her brother, who had grown weary of sharing a bed with his grandmother, upgraded to a mattress of his own.

Rose cleaned the dog feces off the room’s floor and scrubbed her new room’s soiled mattress with bleach and Pine-Sol. Then she bombed the place with bug spray to get rid of the roaches and tracked down a working air conditioner from another room.

Electric company workers restore power to the Star Motel after residents pool their money together in July to pay a delinquent utility bill. MUST CREDIT: Photo for The Washington Post by Eve Edelheit

By early August, it was clear that it was just a matter of time before the motel was permanently shuttered. The power company had its demands, and the water company wanted $57,000 by January.

Some residents bought gas-powered generators. Some searched nearby trailer parks for a place that might take them. Others tried to blot out their anxiety with drugs and liquor. Rose waited and tried not to worry.

“Just gotta survive,” she said.

For much of the past year she had watched a gated community, consisting of 1,000 vacation homes, take shape just across the six-lane highway from the Star. All the while, her family sank deeper into poverty. The lesson for Rose was inescapable.

“The economy just keeps going up, up, up, and the minimum wage is staying the same. So how do they expect people to be able to pay their rent and pay for their car? That’s why more people are ending up in these hotels. There’s not enough resources out there to help us be able to help ourselves.”

A few miles west of the Star Motel on Highway 192, the Rev. Mary Lee Downey was reaching the same conclusion. The pandemic, she worried, was pushing the Orlando area to the brink of a collapse far more serious than the 2008 recession.

That recession had led her to start the Community Hope Center, which had helped hundreds of families escape the motels. Still, the total number of motel families never really shrank despite the decade long run of economic growth.

What was happening at the Star drove home the problem. Many families had filled out forms seeking help from a program administered by Downey’s organization that would pay two months rent and their security deposit if they could find an apartment they could afford. “Trying to find rental or anything to get us out of here,” wrote Maykayla Harper, who was 20, pregnant and earning about $9 an hour at Burger King.

Rose’s family had filled out the same form.

The problem: There were almost no apartments for people earning less than $25 an hour. To Downey it often seemed as if everyone – local government officials, residents at the Star, congregants at her church – expected her 19-person charity to fix a problem that had festered for more than a decade.

A filled dumpster overflows at the Star Motel in Kissimmee, Fla. MUST CREDIT: Photo for The Washington Post by Eve Edelheit

Before the pandemic, Downey had planned to build a 200-unit apartment complex on 5.5 acres that the Methodist Church gave her in 2018. All of the apartments would be reserved for the area’s lowest wage earners.

Downey estimated that she would need to raise about $15 million to make it work. But this summer, just as the economy was sinking, a consulting company that she had hired to study the feasibility of a fundraising effort told her that she wouldn’t be able to pull in more than $3.5 million.

“Maybe we should consider buying the Star,” one of her board members suggested.

Downey quickly concluded it would cost far too much to buy and renovate the decrepit motel. Instead she suggested they consider buying the Magic Castle, a shabby, purple 107-room motel where Rose’s family had stayed off and on over the years.

The owners, who purchased it in 2005, were asking $4.7 million, more than Downey could afford. But she thought that if they were willing to be flexible on the price, she might be able to buy the motel, rehab the rooms and use them as temporary bridge housing.

As word spread that Downey might buy the Magic Castle, some motel owners questioned whether she was tough enough to kick out drug abusers and other problem tenants. “Mary has a heart of gold. She’s tireless,” said one motel owner who has worked with Downey. “But it isn’t the 99% nice that runs a hotel. It’s the 1% nasty.”

Downey had different reservations. If the recession persisted, wages stagnated and the unemployment rate stayed high, the families she took in might be stuck in rooms for years on end. She had started her charity to get families out of motel rooms. Buying a motel felt a bit like surrender.

Five days after the residents raised the $1,500 to turn the power back on at the Star, it went off for good. No one from the state or county government showed up to help the motel residents, some of whom were too old and infirm to survive the blistering August heat for more than a day or two.

Items and debris left in abandoned rooms at the Lake Cecile Inn in Kissimmee, Fla. MUST CREDIT: Photo for The Washington Post by Eve Edelheit

The list of people and agencies that had abandoned the Star as it descended into near-anarchy and filth was long and growing. The owner had disappeared in January. Osceola County Public School employees stopped visits to the motel around the same time. It was too dangerous, a school official said.

The county’s Human Services Department said there was little it could do to help the people stuck there. The county didn’t have any homeless shelters, and local officials weren’t going to spend money to help people find refuge in safer motels.

“We want them out of the hotels,” said Celestia McCloud, the county’s director of human services.

Even law enforcement officials seemed to avoid the Star. Sheriff’s deputies provided security for power company officials when they turned off the electricity. But a few days earlier, when an enraged resident fired a gun at one of his neighbors, it took deputies more than 45 minutes to arrive at the motel.

On the day the lights went out for good, one of the few people who came to the Star to help was Barbie Austria, who runs a small homeless ministry out of a black Dodge pickup truck. While Downey’s Community Hope Center worked on the larger issues that trapped families in the motels, Austria’s focus was narrower. On the day the power went out, her priority was making sure no one died.

Austria, 58, wore her long black hair in a single braid and carried a loaded pistol and extra magazine in her fanny pack. When she felt she was being watched at the Star, she would quietly place her hand on its grip.

Her first stop was Room 129, where Richard Sheldon, 82, lived with his bedridden partner, Allyson Jones. She knew that Sheldon and Jones couldn’t survive more than a day or two in the heat.

Sheldon’s journey to the Star had begun six years earlier with his wife’s death from lung cancer. In the months that followed, his discount ticket business went belly up, and the bank foreclosed on his three-bedroom house. Since then, home had been a series of increasingly run-down motels, ending with the Star.

Most mornings Sheldon made his way across the motel’s parking lot, his aluminum walker scraping the blacktop, to the bus stop where he caught a ride to Walmart. There he usually bought two tins of dog food for his Chihuahuas and a 12-ounce bottle of Caliber vodka for Jones, who downed the booze to dull the pain of several recent strokes.

“It’s been hard on me taking care of her,” Sheldon said. “But it’d be harder on her if I didn’t do it.”

Resident Richard Sheldon, 82 walks to Walmart with his walker at the Star Motel in Kissimmee, Fla. MUST CREDIT: Photo for The Washington Post by Eve Edelheit

Sheldon and Jones brought in only about $1,500 a month in Social Security and disability payments, which meant that most motels were beyond their budget. Austria found a $1,000-a-month motel that would take them and promised that she would help Sheldon and Jones with the bill until she could find them a cheaper option.

A dozen residents gathered to help Sheldon load his possessions into Austria’s truck and tell him goodbye. An elderly woman from Room 127 hugged him, tears streaming down her face, her eye blackened from a fight earlier that day.

“You got to go where it’s okay,” she cried.

“We’ll miss you, Mister Richard,” said a mother who was raising two young boys in a room on the second floor and spent many evenings stumbling around the parking lot in a drug-induced haze.

“I imagine I’m gone for good,” Sheldon told her.

“He’ll be back,” another neighbor muttered under her breath.

Austria maxed out her credit card helping a few Star residents move into safer motels: a single mom from Puerto Rico and her 3-year-old daughter; an elderly man who served time in prison decades earlier and spent his evenings sweeping the sidewalk in front of his room; the young pregnant woman who worked at Burger King and had filled out the form for the Community Hope Center’s housing program.

Each day Austria visited the Star, new people pleaded with her to get them out. She turned down a 61-year-old woman whose room was thick with swarming flies. Her husband had died in the motel room earlier in the year. “This is not me. I’m a neat freak,” the woman pleaded as her 5-year-old granddaughter watched. “I just get depressed.”

Austria decided that the woman’s problems were too severe to dump on a struggling motel owner. The toll of it all was wearing on her. She had been working in the motels on Highway 192 for more than a decade but had never seen a situation as desperate as the Star.

“I feel lost,” she said.

Later that evening, a county commissioner called her for help hauling away the growing hill of rotting garbage in the Star parking lot. Austria had organized a similar effort a few weeks earlier, handing out shovels, marshaling volunteers and finding a company to haul away the trash.

This time she told the county commissioner she wouldn’t help.

“We don’t need another trash pickup,” Austria said. “We need to abandon ship.”

After the power went out at the Star, Rose’s family spent the last of their savings on a week’s stay at the Magic Castle, where the rooms were going for $39 a night. The plan was to buy time until they could come up with a plan.

Her stepfather had applied for a dishwashing job at Chili’s but didn’t get it. Rose was temporarily out of work, too. One of the employees on her shift at Taco Bell had tested positive for the novel coronavirus, and she couldn’t go back to work until she proved she was virus free.

“Everything has got a waiting list or costs too much money,” she texted her manager.

Her boss replied with an address of a testing site that was 11 miles away. But neither Rose nor her parents had a car. So, it wasn’t an option.

Rose Jusino helps pack up her family’s room at The Magic Castle motel as they prepare to move back into the Star Motel after a generator has been provided to them by Barbie Austria. MUST CREDIT: Photo for The Washington Post by Eve Edelheit

Now she was sitting alone on the Magic Castle’s third-floor landing, a quiet perch that overlooked the motel’s empty parking lot and swimming pool. Another steamy Florida morning was turning into another scorching day.

She had moved to the Orlando area with her parents when she was just a toddler. Her family’s house outside Providence, R.I., was purchased to make way for an airport expansion.

“I’d love to go back to my hometown,” her mother had said earlier that morning.

“Our hometown,” Rose corrected.

“But they don’t have nothing,” her mom continued.

For a few years, when Rose’s grandmother was working as a manager at the Rodeway Inn, they all lived in a small house in nearby Poinciana, Fla. Her neighbors owned a trampoline and took her out on a water scooter. Rose had a friend who lived in a house so big that it seemed like “a mansion.”

“I thought we’d be there forever,” she said.

But her grandmother suffered a heart attack and the family income shrank to about $2,000 a month, the sum total of her mother’s and grandmother’s disability checks. Home became a series of motel rooms. Rose celebrated her 15th birthday at the Duo Boutique Hotel. Her parents couldn’t afford a present that year so her stepfather, an amateur tattoo artist, offered his services as a gift. “Don’t get anything stupid, and don’t get it where anyone can see it,” Rose’s mother warned.

Rose pulled the Gideon Bible from the nightstand and flipped through it for inspiration before landing on Jeremiah 29:13. “You will seek me and find me when you seek me with all your heart.” The verse grabbed her like the lyric to a great pop song. “It was so clear,” she said. “It made perfect sense.” Her stepfather inked it across her back.

Her plan was to finish her senior year of high school and enlist in the Air Force. The previous summer she had visited Robins Air Force Base in Georgia with her high school’s JROTC program and thought “it was like heaven.”

The gyms where the troops lifted weights and played basketball were bigger than any she had seen. The meals were cheap and plentiful. “I got a plate and figured that it was going to be at least $13,” she said, “but it was only $2.” Her squadron won an award for being the best on the base.

The military offered her something that had eluded her for most of her life. “It’s a home wherever you’re at, and I’ve always wanted that,” Rose said. “That’s what the military gives you – stability, hope, more than a lot of things can offer.”

Her family had four days left at the Magic Castle. Rose’s mom was thinking about sending Rose, her brother and grandmother to live with Rose’s 21-year-old sister in Orlando. For now, though, home was still the Star, where residents were fighting over generators and gunshots rang out nightly.

Rose Jusino moves back into her room at the Star Motel. MUST CREDIT: Photo for The Washington Post by Eve Edelheit

Rose needed to pick up some clean clothes from her room, so she and her brother headed off to the motel, which was about a half-mile down the highway. They passed a woman begging for change at a traffic light, stores hawking discount Disney T-shirts, an Asian massage parlor and a recently shuttered Quality Inn, where they had briefly stayed in January.

“This is the crackhead area,” Rose said. “Up there is more the prostitute’s spot.”

She pushed open the door to Room 236 and was greeted by a blast of hot air that smelled of cat urine, cockroaches and mold. She didn’t flinch. Inside, Rose had tacked a Puerto Rican flag to one of the walls. A broken television sat atop her dresser along with a plastic trophy from Taco Bell that praised her “hard work and dedication.”

“Only five or six people out of 30 got one,” Rose said of the trophy.

Her brother eyed the room’s silent air conditioner. “That thing used to blow,” he said. “When it came on it felt good in here.”

For Rose, the hardest part of living at the Star was the feeling of isolation. Rose’s co-workers across the street at the Taco Bell wouldn’t go near the motel. Nor would her ex-girlfriend, who had broken up with her right before the pandemic hit. Some days Rose blamed her life at the motel and her inability to afford “nice things” for the failed relationship.

“People come and people go,” Rose said. “Money comes and money goes. Nothing is forever.”

“Family is forever,” her brother replied.

“No,” Rose said. “Not even family.”

She stared out her window at the piles of rotting trash, roving pit bulls and the long-abandoned swimming pool. Her brother dashed outside to meet a church bus that was giving away free lunches in the motel’s circular driveway.

The heat was stifling. Rose mopped her face with her T-shirt. “Damn,” she said. “We’re stuck.”

As summer wore on, trash piles at the Star continued to grow. The raw sewage from a broken pipe spread farther across the parking lot. Someone ransacked Rose’s room and stole her clothes.

Finally, in early September, Rose’s parents found a way out, at least for now. A Kissimmee-based real estate agent, who provides aid to motel families and had helped them in the past, paid $3,000 in deposits and application fees for an extended-stay suite in a run-down resort community. Their new landlord agreed to overlook the fact that Rose’s parents had poor credit and had just started new $9-an-hour fast food jobs.

The rent for the new place was $1,350 a month. For it to last, Rose’s stepfather, who was starting at Burger King and Boston Market, would need to work 50 to 60 hours a week. Rose’s mother, who can only work part time because she collects disability, needed 20 hours a week.

Neither of her parents could afford many sick days. Nor could they absorb any unexpected expenses. Rose wanted to go back to work, too, just in case they needed the money. But her mother pressed her to focus on her grades.

“This is your senior year, the big year,” she told her. “Don’t do that to yourself.”

For the first time in months, Rose had a clean, safe place to sleep. She didn’t have to worry about gunshots or the electricity going out. For the moment, she wasn’t totally stuck.

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Village of New Paltz might expand eligibility for revolving loan fund | Local News

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NEW PALTZ, N.Y. — The village is considering expanding eligibility for a little-used revolving loan fund to include the needs of businesses being hit hard by the COVID-related economic slowdown.



Village of New Paltz trying to help residents get refunds from waste haulers

Village of New Paltz Mayor Tim Rogers




Mayor Tim Rogers said Tuesday that the $500,000 loan fund could be used to help businesses with more than just the purchase of personal protective equipment allowed under state and federal programs.

“We’re trying to piggyback off of the existing language for the revolving loan fund,” he said. “We just wanted to make it somewhat broad in terms of recognizing COVID impacts.”

One thing the village is considering is eliminating the rule that prohibits the use of the fund for emergency situations or business operations.

“Here we are flipping it and saying that you can,” Rogers said.

Guidelines for the loan program, which was established with funding from the U.S. Department of Housing and Urban Development, were last updated in 2013. The loan fund’s current interest rate is 3%.

Rogers said the fund has received only two loan applications over the past six years, and one of those was rejected.

“There’s only been one that we awarded and one that we straight up denied,” he said, noting that the rejection was because of the applicant’s bad credit history.

Rogers said the COVID-19 pandemic has created something of an economic irony in the village: decreased foot traffic in the business district but a significant increase in applications for building permits.

“[Village Safety Inspector] Cory Wirthmann believes our busy Building Department is partially a function of people traveling or vacationing less,” the mayor said. “ Money they would have spent is now going to home improvement wish list projects or just deferred maintenance, like finally choosing to replace the old roof.”

Comments about expanding the revolving loan fund should be emailed to  assistant@villageofnewpaltz.org. A loan application and information about the process can be found online at bit.ly/npaltz-loans.

For local coverage related to the coronavirus, go to bit.ly/DFCOVID19.

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Will Missing One Car Payment Hurt My Credit Score?

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The short answer is yes: skipping one car payment can hurt your credit score, but not until it hits a certain mark. One missed payment doesn’t destroy your credit score forever, but it can stay on your credit reports for years.

Missed Payments and Your Credit Score

One or two missed payments may not be enough to completely ruin a good credit score, but they can lower your credit score quite a bit. How much your credit score can drop depends on many things, including how much credit history you have and how much time has passed since your missed payment.

How much a missed payment can impact your credit score is heavily influenced by how many missed payments you currently have reported, your current credit score, your credit utilization, how many accounts you have, and more. In other words: your drop in credit score due to one missed car payment is likely to be unique to you. The drop in points could be anywhere from 10 to 100 points, or more.

Will Skipping One Car Payment Hurt My Credit Score?If you have a thin credit file or little to no credit history, one missed car payment can be devastating to your credit score. And, in some cases, having a good credit score and then a reported 30-day missed payment could hurt your credit score more because you have more to lose.

The severity of the missed payment matters too. If you’re 30 days on the payment, it’s not as bad as being 90 days late. Most creditors report missed payments in these timeframes: 30 days; 60 days; 90 days; 120 days; 150 days; and then delinquent/charge-offs after that. The longer you let that missed payment go on being missed, the worse it is for your credit score.

To bounce back from a missed auto loan payment, be sure to make that payment as quickly as you can. The sooner you make up that payment, the better off you are.

How Long Are Missed Car Payments Reported?

Missed and late car payments can remain on your credit reports for up to seven years. How much they damage your credit score lessens each year, but it can still impact your overall credit score years afterward.

Your payment history is the most influential part of your credit score: a whopping 35%. In terms of credit repair, this means making all of your bill payments on time is important. If you have an auto loan that isn’t currently being reported – meaning your loan and on-time payments don’t show up on your credit report – the missed and late payments are likely to be reported anyway. Even auto lenders that don’t generally report their loans to the credit bureaus typically report missed/late payments.

If you think you’re about to miss a payment and you want to avoid hurting your credit, you have some options to explore.

Ask Your Lender for a Deferment

Lending institutions understand that times can get tough. If you think you’re about to miss a payment, contact your lender right away and ask what options are available to you. Keep your lender in the loop if you’re going through rough times – the sooner you get ahold of them the better.

This is especially true right now, given the current pandemic. Many borrowers left without work have been forced to find alternatives to making payments and needed assistance with their car loans and mortgages. There is a process that allows borrowers to take a breather and gather themselves, and it’s called a deferment.

A deferment, in a nutshell, pushes the pause button on your auto loan. Most times, lenders pause the car payments for up to three months and add those payments to the back of the loan term. If you qualify, you may be able to recenter yourself and get back on track. After the deferment is up, the car payments resume and you continue paying as normal.

The only downsides to this option are that your interest charges continue to accrue, and your loan term is extended. However, in the grand scheme of things, a few more months of a car payment and interest charges is better than default or multiple missed payments!

There is a common stumbling block to deferments though: most lenders don’t approve these plans unless your current on the loan. If you’ve already missed one payment or more, then the lender isn’t likely to approve it.

Is Refinancing Your Auto Loan an Option?

If you’re struggling to keep up with your current car loan, refinancing for a lower monthly payment could be the answer.

Refinancing involves replacing your current loan with another one, typically with a different lender. Most borrowers refinance to lower their monthly payments by either lowering their interest rate or extending their loan term (sometimes both).

To refinance, you also need to be current on your auto loan. Most lenders that offer refinancing don’t consider borrowers with multiple missed/late payments on their car loan. Additionally, you generally need to meet these requirements for refinancing:

  • Must have equity in the car or the loan balance must be equal to the vehicle’s value
  • The car is under 10 years old with fewer than 100,000 miles
  • Your credit score has improved since the start of the loan

You may need to meet other requirements, depending on the lender you choose. Refinancing doesn’t typically require a “perfect” credit score, but you may need a good one to qualify.

Ready to Get a More Affordable Car?

If you’re struggling to make ends meet and worried about skipping payments, then it may be time to sell your car and get something more affordable. If you’re concerned that a poor credit score could get in the way of your next auto loan, then consider a subprime lender through a special finance dealership.

Subprime lenders are indirect lenders that are signed up with certain dealers. They assist borrowers in all sorts of unique credit circumstances, and they could help you get into a more affordable vehicle if you qualify.

Finding a subprime lender can be as simple as completing our free auto loan request form. Here at Auto Credit Express, we work to match borrowers to dealerships with bad credit lending resources in their local area, at no cost and with no obligation. Get started today!

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How to Avoid a Prepayment Penalty When Paying Off a Loan | Pennyhoarder

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Look at you, so responsible. You received a financial windfall — stimulus check, tax refund, work bonus, inheritance, whatever — and you’re using it to pay off one of your debts years ahead of schedule.

Good for you! Except… make sure you don’t get charged a prepayment penalty.

Now wait just a minute, you say. I’m paying the money back early — early! — and my lender thanks me by charging me a fee?

Well, in some cases, yes.

A prepayment penalty is a fee lenders use to recoup the money they’ll lose when you’re no longer paying interest on the loan. That interest is how they make their money.

But you can avoid the trap — or at least a big payout if you’ve already signed the loan contract. We’ll explain.

What Is a Loan Prepayment Penalty?

A prepayment penalty is a fee lenders charge if you pay off all or part of your loan early.

Typically, a prepayment penalty only applies if you pay off the entire balance – for example, because you sold your car or are refinancing your mortgage – within a specific timeframe (usually within three years of when you accepted the loan).

In some cases, a prepayment penalty could apply if you pay off a large amount of your loan all at once.

Prepayment penalties do not normally apply if you pay extra principal in small chunks at a time, but it’s always a good idea to double check with the lender and your loan agreement.

What Loans Have Prepayment Penalties?

Most loans do not include a prepayment penalty. They are typically applied to larger loans, like mortgages and sometimes auto loans — although personal loans can also include this sneaky fee.

Credit unions and banks are your best options for avoiding loans that include prepayment penalties, according to Charles Gallagher, a consumer law attorney in St. Petersburg, Florida.

Unfortunately, if you have bad credit and can’t get a loan from traditional lenders, private loan alternatives are the most likely to include the prepayment penalty.

Pro Tip

If your loan includes a prepayment penalty, the contract should state the time period when it may be imposed, the maximum penalty and the lender’s contact information.

”The more opportunistic and less fair lenders would be the ones who would probably be assessing [prepayment penalties] as part of their loan terms,” he said, “I wouldn’t say loan sharking… but you have to search down the list for a less preferable lender.”

Prepayment Penalties for Mortgages

Although you’ll find prepayment penalties in auto and personal loans, a more common place to find them is in home loans. Why? Because a lender who agrees to a 30-year mortgage term is banking on earning years worth of interest to make money off the amount it’s loaning you.

That prepayment penalty can apply if you want to pay off your loan early, sell your house or even refinance, depending on the terms of your mortgage.

However, if there is a prepayment penalty in the contract for a more recent mortgage, there are rules about how long it can be in effect and how much you can owe.

The Consumer Financial Protection Bureau ruled that for mortgages made after Jan. 10, 2014, the maximum prepayment penalty a lender can charge is 2% of the loan balance. And prepayment penalties are only allowed in mortgages if all of the following are true:

  1. The loan has a fixed interest rate.
  2. The loan is considered a “qualified mortgage” (meaning it can’t have features like negative amortization or interest-only payments).
  3. The loan’s annual percentage rate can’t be higher than the Average Prime Offer Rate (also known as a higher-priced mortgage).

So suppose you bought a house last year and then wanted to sell your home. If your mortgage meets all of the above criteria and has a prepayment penalty clause in the mortgage contract, you could end up paying a penalty of 2% on the remaining balance — for a loan you still owe $200,000 on, that comes out to an extra $4,000.

Prepayment penalties apply for only the first few years of a mortgage — the CFPB’s rule allows for a maximum of three years. But again, check your mortgage agreement for your exact terms.

The prepayment penalty won’t apply to FHA, VA or USDA loans but can apply to conventional mortgages — although the penalty is much less common than it was before the CFPB’s ruling.

“It’s more of private loans — loans for people who’ve maybe had some struggles and can’t qualify for a Fannie or Freddie loan,” Gallagher said. “That block of lending is the one going to be most hit by this.”

How to Find Out If a Loan Will Have a Prepayment Penalty

The best way to avoid a prepayment penalty is to read your contract — or better yet, have a professional (like an attorney or CPA) who understands the terminology, review it.

“You should read the entirety of the loan, as painful as that sounds, because lenders may try to hide it,” Gallagher said. “Generally, it would be under repayment terms or the language that deals with the payoff of the loan or selling your house.”

Gallagher rattled off a list of alternative terms a lender could use in the contract, including:

  • Sale before a certain timeframe.
  • Refinance before a term.
  • Prepayment prior to maturity.

“They avoid using the word ‘penalty,’ obviously, because that would give a reader of the note, mortgage or the loan some alarm,” he said.

If you’re negotiating the terms — as say, with an auto loan — don’t let a salesperson try to pressure you into signing a contract without agreeing to a simple interest contract with no prepayment penalty. Better yet, start by applying for a pre-approved auto loan so you can get a pro to review any contracts before you sign.

Pro Tip

Do you have less-than-sterling credit? Watch out for pre-computed loans, in which interest is front-loaded, ensuring the lender collects more in interest no matter how quickly you pay off the loan.

If your lender presents you with a contract that includes a prepayment penalty, request a loan that does not include a prepayment penalty. The new contract may have other terms that make that loan less advantageous (like a higher interest rate), but you’ll at least be able to compare your options.

How Can You Find Out if Your Current Loan Has a Prepayment Penalty?

If a loan has a prepayment penalty, the servicer must include information about the penalty on either your monthly statement or in your loan coupon book (the slips of paper you send with your payment every month).

You can also ask your lender about the terms regarding your penalty by calling the number on your monthly billing statement or read the documents you signed when you closed the loan — look for the same terms mentioned above.

What to Do if You’re Stuck in a Loan With Prepayment Penalty

If you do discover that your loan includes a prepayment penalty, you still have some options.

First, check your contract.

If you’ll incur a fee for paying off your loan early within the first few years, consider holding onto the money until the penalty period expires.

Pro Tip

If you don’t have a loan with a prepayment penalty, contact your lender before sending additional money to ensure your payment is going toward principal — not interest or fees.

Additionally, although you may get socked with a penalty for paying off the loan balance early, it’s likely you can still make extra payments toward the balance. Review your contract or ask your lender what amount will trigger the penalty, Gallagher said.

If you’re paying off multiple types of debt, consider paying off the accounts that do not trigger prepayment penalties — credit cards and federal student loans don’t charge prepayment penalties.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

This was originally published on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through actionable and inspirational advice, and resources about how to make, save and manage money.

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