It is awfully easy to fall into the trap of credit card debt, especially when the economy closes due to a white swan even such as the coronavirus pandemic. Do not assume your credit cards and other debts will be forgiven or delayed simply because of the virus outbreak. This is a time to pare back your spending, hunker down, and hope for the best while preparing for the worst.
The following will provide you with earnest advice in handling your credit card debt through this pandemic. For more information about handling your credit card debt, visit this site.
Inaction Might Be the Most Prudent Strategy
It might seem counterintuitive to do absolutely nothing about your credit card debt and other debts amidst the coronavirus pandemic. However, this strategy has its merits and you should consider why it may help. Though doing absolutely nothing is not a viable strategy across posterity, it bides time until you know what your personal finances will be like in the short-term as the pandemic unfolds. You don’t want to jump the gun and make rash decisions that you may punch yourself in the face for down the line. In fact, the majority of people with debt should give serious consideration to doing nothing at all until there is more clarity to the financial situation. There is nothing wrong with waiting to come up with a plan but make sure you don’t oversleep and end up snoozing where the action is in fact called for on your part.
Ask Lenders for Assistance
Lenders are willing to work with those who request assistance. The key here is that you need to reach out and be proactive about your finances. The magic words amidst the pandemic according to Scura Law Firm are as follows: “I have no income due to the coronavirus.” This statement makes it perfectly clear to your creditors that you do not have the financial means to pay your debts while unemployed. Your creditors will respond to this statement of destitution by providing one or several options and repayment programs that provide favorable terms to you, the debtor. Make sure you don’t bite your tongue and speak up about your hardship at this time and how any assistance would greatly help you and your family.
Safeguard Your Cash Amidst the Pandemic
There is no sense paying the little bit of cash you have on-hand to satisfy debt obligations if you are unemployed or underemployed as a result of the coronavirus pandemic. There is no guarantee your employment situation will improve once the economy is reopened. It is quite possible you will be permitted to put your home mortgage in forbearance for upwards of a year. Furthermore, car noteholders are forming programs to permit borrowers to defer their payments and retain ownership of their vehicle.
So don’t be so quick to make the monthly payments on these assets simply because you have some money in savings. There is a good chance you will need that money for food, utilities and other necessities if you might not get your job back in the near future. You don’t have a shiny eight ball in front of you where you can predict whether or not your furlough is withdrawn. Better to be safe than sorry.
Assistance for Unsecured Debts
Car notes and home mortgages are secured loans. In contrast, credit card debt and personal loans are categorized as unsecured debts. There are programs in development to defer several months of payments on these unsecured debts. There is no reason to feel guilty about taking advantage of these options. Otherwise, it might not be possible to withstand this unheralded economic storm.
Seize the opportunity to skip payments and save as much cash as possible. In fact, creditors will even bypass reporting these skipped payments as later payments to the credit bureaus. This way, your credit rating won’t take a hit and you won’t end up with elevated interest rates or late fees. If it turns out you cannot pay your unsecured debts in the years ahead, you can deal with those debt issues at that point in time. The takeaway is to hunker down and address the short-term so you have at least a chance to win the game in the long-term.
Hardship Plans Might Be Available
It is quite possible banks will offer hardship plans to those who are indebted and do not obtain employment in the months or possibly even years ahead. These plans reduce interest rates on the money owed while permitting borrowers to gradually pay down their debt with comparably lower monthly payments. These hardship plans were implemented in response to the Great recession of 2008. Some such hardship plans still continue to this day. However, it might not be prudent to immediately enroll in a hardship plan until discussing its potential merits and drawbacks with a credit counselor. Start off by going to your state’s website and taking a look at what programs are available. There are many different federally funded programs that are unique to each state right now. Make sure you do your due diligence and find out what options are available to you.
When in Doubt You Should Wait
There is nothing wrong with merely waiting to see how things play out. It is quite possible the pandemic will last much longer than anticipated, ushering in a new era highlighted by a universal basic income. Think positive, plan for a negative outcome, and evaluate all options on the table in-depth prior to making a decision.
Obtain financial advice from a credit counseling specialist or other professional in the financial industry before taking action. If it turns out you are likely to remain unemployed and are drowning in debt, Chapter 7 bankruptcy might be the most viable option to wipe your financial slate clean. However, it is sensible to wait until the dust settles on the pandemic prior to filing Chapter 7 as this financial reset significantly reduces your credit rating.