The COVID-19 pandemic has impacted many people’s income streams, and there are already over 22 million unemployment claims. Too many people have suddenly lost their jobs and are having trouble finding another one. Many also have debt.
Losing your job is bad enough, but what if you are also in debt? In just one quarter of 2019, personal consumer debt in the United States reached almost $14 trillion. If you owe money on loans or a mortgage, you may be wondering how you’ll make ends meet. The longer you wait to pay it off, the more interest will accumulate on your balance. Plus, paying down debt is an important part of avoiding bankruptcy.
Look At Your Debt-Paying Plan
The first step you should take when you have debt is to take a moment to breathe. If you just lost your job, do not make any major decisions right away. Take some time to create a plan that balances your immediate needs with your long-term goals. Look at both your debt and your personal financial situation. See the amount that you owe and what the interest rates are.
These details will determine the right steps to take. In general, you will want to keep up with basic living expenses, such as food, utilities and rent. Even though you can't ignore your loans, you need to have food and shelter, as well.
Cut out as much unnecessary spending as possible. That includes takeout food, new clothes and many subscriptions. This is a good time to consider using your emergency funds instead of going into debt even further.
Help From The Government
The government is making an effort to help people who are struggling during the COVID-19 pandemic. Recently, the Coronavirus Aid, Relief and Economic Security (CARES) Act was passed. If you earn $75,000 or less each year, then you will likely receive a $1,200 stimulus check. If you are married and have children, you might get more money.
That act also affects people who have student loans. You can defer any payments on these loans until the end of September. Of course, you will still need to plan to pay these off in the long run.
You may have also filed an unemployment claim. If you have that money coming in, then you will also have it supplemented by as much as $600 a week for as long as four months. This supplemental income can apply retroactively even if you have not yet gotten it.
With the government’s CARES Act, you can also get help with your mortgage. This includes a ban on foreclosing on mortgages for 60 days if your mortgage is backed by the government. If you are having financial hardships because of the virus, you may qualify to have 180 days of forbearance. That means that your loan payments will be reduced or delayed. But you will still have interest accruing.
Try to take advantage of as much government aid as you can. Even a little bit extra may be vital when it comes to debt payments and living expenses. It’s a good idea to try to cover even just what you are required to pay each month on your debt to avoid problems with your credit score.
Is It A Good Idea To Pay Off Debt?
It is important to keep paying off the essentials, such as your car and home. If you do not keep up with these payments, you might end up losing them.
If you can cover all of your essentials right now, you can safely keep paying off your debt. But remember that there are different types of debt. You’ll want to go for the loans that have high interest rates, which are generally credit cards. If you have loans with lower interest rates, they do not have to be among your priorities.
Closing Thoughts
As many businesses remain closed, you may not know when you will have a job again. Now is not a good time to ignore your debt. Consider working with your lender and letting them know what is going on. By managing your finances and taking advantage of government aid, you can tide your household over.
