How to Deal with Debt Payments while Unemployed
How Do You Pay Your Bills after Losing Your Job?
1. Consider Refinancing Your Debt
If your interest rates are making your payments hard to handle, you should consider refinancing your debt. Interest rates for credit cards and especially mortgages are relatively low now. For credit cards, you may be able to consolidate your existing cards into one, lower your rate card, and lower your monthly payment to some extent.
You can also take out a home equity line of credit. There will be closing costs, but these can often be included in the revamped home mortgage to avoid out of pocket cash. The significant upside here is you are not taking on new debt even though you are increasing your mortgage debt, albeit at a very low-interest rate, which is probably lower than any other form of debt you have.
2. Consider Other Options
You can use part of your emergency fund, if you have one, to cover short-term costs. It would help if you sold off things you are not using or no longer have any use for. You can get cash by selling these, and although this may not seem like much per item, you can often make $1,000 or more overall, putting a big dent in your expenses for the next month or so while you are looking for your new job role.
How Do You Handle Credit Card Debt While Unemployed?
As mentioned above, if you qualify, you can consolidate credit cards into one new, low-interest-rate card. However, for those who can not use this option, consider contacting your credit card companies directly. Most card companies would gladly take some interest every month rather than nothing. Some will temporarily waive your interest and let you pay the principal amount only (you will have to pay the interest later). Still, anyway, you can lower your payments and relieve the stress on you and your family.
Of course, do not be afraid to ask if they will suspend your payments for a period while you get a new job. Bring this up especially if COVID is the cause of your job loss, companies want your business long term, and if you have a plan to find your next job, they will likely listen and suggest available relief plans.
What Happens If Your Debt Piles Up During the COVID Crisis?
Well, it is likely to do so to some extent if you cannot get a home equity line of credit or have a substantial emergency fund in the bank. The key is to make some payments, even if small, to your debtors, and have a recovery plan once you start working again. You may also be able to reduce your expense by taking advantage of many federal, state, and local programs, who are there to assist those out of work because of the pandemic.
Different Kinds of Delinquencies
There are different kinds of delinquencies when it comes to missing any payments. Unsecured debts like student loans or credit cards have a comparatively lower overall impact on your life. But do try to make even a small payment each month. If you start missing payments for secured items like your home or car, then the consequences can be far worse. Yes, they will affect your credit scores, but missing payments on your auto or home can result in losing one or both, including any home equity you may have.
The level of your delinquency matters is taken into account when determining your credit score. Payment delayed by 30 days is any day much better than a 90 days delay. Make sure to contact your creditors directly if you are forced to miss any payment.
Many will work with you to find a solution that is feasible for both. Once you are past the 90 days limit on any debt, it becomes even more evident that you will not recover, and as the ones who lent you the loan know this, they will take whatever action they deem appropriate depending on the kind of debt.
Budgeting
If you do not have a well-structured and documented budget, now is the time to start. You still have the time to do it, and it should be something you do for a lifetime. Start by adding up all income you will have while unemployed. Then list all expenses and cut anything that is not essential.
Essential costs include housing, food, utilities (probably your car too). Yes, you can afford to live without TV. Everyone did for centuries in the past. It is better to cut it off than be delinquent and get cut off anyway, thereby being forced to make security deposits or prepay months in advance to restart it the service.
Nowadays, many of us have subscribed to many services on autopay. Make sure you have a list of these and stop all that you can, e.g., newspaper service and anything else you can live without for the time being—there is no sense in draining your bank account needlessly with these auto-pays.
Emergency Fund
If you have one, use it! In fact, this is the reason you set money aside, namely, to counter unforeseen emergencies. Being out of work during a pandemic is an emergency. You can restore the funds later when you start working again.
Consider Credit Counseling
If you need help with budgeting or planning on how to pay your creditors, there are many local and county services throughout the country to assist you, most of which are free. Look through your local government websites to see what is available or call them directly and ask. Many qualified people have volunteered to assist people in times like these, so do not be hesitant to ask for help. Too many people wait until they are in dire circumstances before asking for assistance. Do not be one of them.
Getting help can make a massive difference both now and for your future.
No matter what, do not give up. You are not alone, and there is a brighter future on the horizon.
Last Resort
Online loans should be the last resort you should choose to get cash in an emergency. The amounts will likely be $500 or less and have high fees and fast payback times, so be careful before considering this option.
However, it may be a viable alternative for some even if it is to buy groceries until the first relief or unemployment checks start coming in.
Do not worry if you have poor credit as short term lenders are willing to lend regardless of credit scores.
If you decide to request a short term emergency loan, then FaaastCash is here to assist you.
