Debt And Coronavirus: Alternatives To Consider If You Can’t Pay Your Bills
Regardless of where you reside in the U.S., there’s a decent possibility that the coronavirus pandemic has had an effect on your finances. An April 2020 TransUnion study reports that 61% of U.S. buyers have been monetarily affected by the worldwide coronavirus pandemic. The average consumer reports being only about a month and a half away from not being able to pay for bills and other debts.
To deal with the global health emergency and the effect it has had on individuals who’ve lost their jobs or are earning less, the federal government, as well as state governments, have taken positive actions to aid those who are struggling financially. Numerous organizations are also offering assistance to struggling individuals.
Read on to find a few resources and strategies you might find helpful if you find yourself unable to pay your bills because of the COVID-19 pandemic.
Table of Contents
- Connect with Utility Providers
- Contact Creditors and Lenders
- Consider a Consolidation Loan
- Consult a Credit Counselor
- What’s Next?
Connect with Utility Providers
If your salary has been affected by the coronavirus pandemic, one of the initial steps you should take is to adopt a temporary emergency budget. An emergency budget will probably require some spending cuts, maybe even where your bills are concerned. You should seriously consider dropping superfluous expenses (like cable or streaming service subscriptions) or bringing down your present cell phone plan to a less expensive alternative.
Certain utilities fall under the basics classification. If you’re having cash issues, covering even the basics can feel overwhelming. Fortunately, many utility providers and telecommunications companies are offering temporary relief to consumers affected by the coronavirus emergency.
In certain states, including Indiana, Texas, and Connecticut, the emergency relief is required. Organizations in other states might be readily offering help and modifying policies themselves. In either case, you’ll have to proactively contact your utility provider to determine whether any hardship help is accessible to you.
A couple of instances of notable utility suppliers offering COVID-19 relief to consumers include:
Comcast, the web and mobile provider, is offering assistance to consumers in a few different ways. To begin with, the company will delay service and forgo late expenses for customers experiencing hardship.
Xfinity consumers also have access to unlimited data for 60 days, without additional charge. Some customers may also be qualified for 60 days of internet access. The company is also offering Xfinity WiFi hotspot access to the general public, even non-Xfinity consumers.
Duke Vitality, one of the country’s biggest electric power holding companies, has vowed not to disconnect power for non-payment during the coronavirus pandemic.
Pacific Gas and Electric (PG&E)
Pacific Gas and Electric Organization (PG&E), another major supplier of power, has put an impermanent pause on utility shut-offs for non-payment. The California-based company is also offering reductions in some coronavirus affected consumers’ energy bills.
Remember that regardless of whether your utility supplier offers you a relief period, there may be a catch. Your bill likely won’t be pardoned. It’s wise to pay as much as possible to bear the cost of every month. Doing so may assist you with abstaining from running up an increased balance that you’ll need to manage later on.
Contact Creditors and Lenders
Similar to utility providers, some creditors and lenders may also offer exceptional hardship relief programs during the coronavirus pandemic. Once more, payment relief is commanded by some state and local governments, while other financial hardship programs are being offered on a voluntary basis.
For those with federal student loans, the government has given many borrowers an automatic half year break from interest and payments, in effect until September 30, 2020. The March 27, 2020, CARES Act provides mortgage help to borrowers with home loans that are federally-backed.
Your bank may also offer forbearance, delay, or other varieties of financial relief on loans. Many credit card companies have also revised their policies to provide hardship help to those in need.
Regardless of financial well-being, don’t avoid a payment without connecting with your bank or loan provider to discuss options. Often, there may be options for those experiencing hardship that can assist you and help you maintain your credit score until you’re financially stable again.
It’s important to get all of the details before agreeing to any relief or aid. Understand the agreement, including what occurs after the relief or aid ends. See whether you’ll have to make up missed installments quickly or after some amount of time. Ask about how the lender will report your record to the credit authorities. You should completely comprehend the terms and conditions, and keep a hard copy before you consent to any special aid or relief installment agreement.
Consider a Consolidation Loan
Applying for an additional line of credit while experiencing financial hardship can be a dangerous endeavor. You would prefer not to add to your financial issues by assuming more debt. In any case, if you have a decent credit score, you may have the option to take a low-rate consolidation loan that would provide the money needed and allow you to make affordable, regularly scheduled payments.
Image this situation. You presently owe $10,000 in credit card obligation. The loan fee on your charge cards is 17%, a little over the national average. Because you have a good credit history, you meet all requirements for a four-year consolidation loan with an 8% rate.
If you’re experiencing difficulty making payments, bringing down your loan payments could be a major benefit. If you decide to consolidate your debt, you should abstain from running up new charges on your credit cards.
Consult a Credit Counselor
Contingent upon your circumstance, a consolidation loan may not be a good idea. For instance, if you have a low credit score, you may experience difficulty meeting the requirements for a consolidation loan with a low enough interest rate for consolidation to be a benefit.
In the event that consolidation isn’t an available alternative and your lenders and utility providers aren’t offering the hardship alleviation you need, you might need to think about another course of action. A non-profit credit counselor may offer options you haven’t considered.
Credit counselors offer help in various ways. They might have the option to offer you, counsel, on the planning and management of credit and debts. Now and again, a credit advisor might have the option to assist you with a type of obligation union known as a debt management program, or DMP.
Under a debt management plan (DMP), a credit company can assist you with bringing down your loan costs, lower bills, and expenses and pay off specific obligations quicker (ordinarily within three to five years). When you consent to a DMP, you make a solitary regularly scheduled payment each month to your credit counseling company. The company then separates that payment and circulates it to the banks involved in your debt management plan. This may bring down your regular bills and loan payments.
While there are numerous potential advantages of DMPs, you should also consider their downsides. To begin with, DMPs generally aren’t free. Many credit counseling and advising companies (even those that are non-profits) will charge a fee each month to deal, on your behalf, with a DMP. Another downside to consider, a DMP can include only some types of unsecured debt, for example, credit cards. A DMP isn’t much help for medical debt, student loan debt, or tax debt.
If you decide that a credit counselor or adviser might be helpful for you, it’s good to do your research before. The Consumer Financial Protection Bureau provides two recommended organizations to contact when searching for credit counseling companies: Financial Counseling Association of America and the National Foundation for Credit Counseling.
Once you discover a credit counseling or advising company you might want to work with, the Consumer Financial Protection Bureau suggests evaluating the companies standing with your state’s consumer protection agency and your state’s attorney general before continuing.
The above options may give you a few solutions to deal with the stressful financial situation at hand. Be that as it may, if you’re in good health, the best option is to look into options to replace or increase your income as soon as possible.
Expanded unemployment benefits may provide relief until you’re able to return to work. You can also make a plan to spend your stimulus check in a way that allows you to most efficiently use the extra funds.