The outbreak of the coronavirus disease of 2019 (COVID-19) has wreaked havoc on economies around the world. In an attempt to slow the spread of the disease, many countries and territories have shut down nonessential businesses and encouraged people to stay home. Although this social distancing strategy may be effective for handling the outbreak, it can have a major impact on the finances of both individuals and businesses.
For many people, the situation has exacerbated an already tenuous grasp on their financial health. If an individual is completely leveraged with debt and simultaneously has their work and income reduced or eliminated altogether, there is almost no place to turn. Without emergency savings, the only place to turn would be a personal loan, which would also be difficult to secure without employment and would only serve to leverage someone even more.
This is a perfect example of why I always talk about debt elimination and emergency savings. There are times of economic, political, or social unpredictability which, frankly speaking, can lead to financial ruin, if someone is not prepared. So let’s examine some strategies for handling debt during this very uncertain period.
Challenges With Handling Debt During Crisis
For many people, the key challenge of managing debt during the coronavirus outbreak is a loss of income. Unemployment has spiked as many companies have reduced their workforces, especially hourly and customer-facing team members.
Even people who still have their jobs may be seeing less income due to reduced hours or workload. Small business owners and self-employed workers may also be struggling due to the economic shutdown.
Additionally, the slowing market has hurt many people’s investments. Many essential goods are also more expensive due to the high demand for household products and certain foods. This is a compounding problem because when people have less money, they have a harder time keeping up with bills and debt payments. Since the problem is so widespread, some lenders and vendors are less motivated to provide any leniency as their revenues are also down.
In short, this can be a seemingly insurmountable problem for individuals. If you are struggling with debt due to the coronavirus pandemic, you may be wondering what you can do.
Ways the Government Is Trying To Help
Fortunately, there is good news even for those hit worst by the outbreak’s economic troubles. On March 27, the Coronavirus Aid, Relief and Economic Security Act was signed into law. This provides relief to financially troubled individuals and businesses in a variety of ways:
- Individuals and families will receive a one-time direct payment based on income and family size. For an individual making less than $75,000, this would be $1,200.
- Unemployment benefits have been lengthened and now include freelancers and gig workers.
- Small businesses can receive zero-percent interest loans. These may also be forgiven in the future.
- Large corporations that are especially distressed may be eligible for grants and loans.
- Some “safety net” programs such as SNAP (food stamps) are also getting extra funding to help hard-hit families.
- Student loan collection actions and negative credit reporting have been suspended for federal loans.
- Some people are eligible for short-term forbearance on their mortgages. Certain mortgages (those that involved federal agencies) have a 60-day foreclosure moratorium.
Additionally, many states, counties, and cities are implementing similar relief. These efforts are intended to help people avoid financial ruin if they are unable to pay their debts due to the coronavirus outbreak.
Strategies You Can Use To Manage Debt
Handling debt during crisis periods is always challenging. If you are currently struggling, the first thing you should do is investigate which federal, state, and local programs you may be eligible for. There are many programs that can be helpful. However, some require opting in and may require some proof that you have been negatively impacted by the outbreak.
Other programs do not require any action from you. However, you can’t make decisions based on those programs if you don’t know they exist. Many agencies have websites and hotlines to help you determine what, if anything, you are eligible for.
Additionally, you may be able to receive relief from private companies. For example, some credit card companies will let you skip a payment without any penalties. Others may waive late fees for a short time. Similar programs are available for auto loans, utilities, and more. However, you need to ask about the options available. Most companies and service providers will not extend these benefits if you do not tell them about your current circumstances.
Keep a close eye on your credit report. If you notice anything unexpected, deal with it promptly. Additionally, if you are going to be late on a payment, contact the creditor you owe the money. Even if you can’t avoid penalties, you may be able to avoid negative reporting.
Managing Your Budget
Budgeting can help significantly with taking on debt during this outbreak. A strong financial plan will help you take better control of your money. The more you can save right now, the more you can use to pay down debts or avoid taking on additional debt. Even if you are completely avoiding unnecessary spending, creating a budget may help. The visibility of your finances can be invaluable during difficult times.
Get Help With Debt Relief During the Coronavirus Outbreak
Debt during an outbreak can be immensely challenging to deal with. Of course, if you find yourself extremely compromised with debt or simply feel overwhelmed and not sure of the best course of action, we can help you. Financial Rescue has helped tens of thousands of people resolve hundreds of millions of dollars in debt over the last decade. These are precarious times and it’s natural to feel anxious. Take a step forward to your financial freedom and a happier life, and contact us today or fill out the form on our website.