The coronavirus has put us in uncharted territory. What’s going to happen to our jobs, families and household finances for an undetermined period of time is hard to know. Banks, lenders, state and federal entities and many others are all coming together to try to help those of us experiencing financial shocks. (You can keep abreast of what the federal government is doing here.)
Many of us are (understandably) afraid of what lies ahead. Many are searching for answers. We’ve put together this guide to dealing with personal debt issues to help you cut through all the clutter. Here’s the latest information on how to deal with various hardships, whether it’s your credit cards, mortgage, student loans or loss of a job.
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The silver lining of this particular crisis is that for the most part, creditors and lenders fundamentally understand that consumers didn’t cause this, and they want to do what they can to help — it’s in their own best interests, after all. Banks need customers. (See the article, “How to deal with credit cards and other debts during the coronavirus crisis.”) They’re often willing to work with you via hardship or forbearance programs, lowering interest rates and suspending payments. Below is a list of resources that can help you navigate this difficult and confusing time — and gain clarity on how to move forward.
Businesses are closing, letting many of their employees go. Others who were independent contractors or part-timers find themselves with a sudden drop in income. Unemployment insurance has been a traditional safety net for many, but whether you qualify depends on many factors (here’s a useful breakdown). For example:
All that said, the federal government is allowing states to amend their laws to offer unemployment benefits to workers whose jobs have been affected by COVID-19. Here are some resources you may find helpful:
There’s nothing like the stress of not knowing whether you can make your credit card payment to add to the anxiety surrounding the current crisis. The good news is that credit card issuers are more flexible now and are willing to work with you. Many are waiving late fees and interest charges, offering reduced monthly payments, temporarily reducing interest rates, or allowing you to skip payments due to hardship.
Contact your credit card issuer (either on their website or via the phone number on the back of your card) and simply ask. Here are a few tips for asking for assistance:
Here are a few resources that might be helpful:
Medical debt has been a problem in the U.S. long before the current coronavirus crisis. In fact, according to a 2019 study, about 137.1 million American adults reported a “medical financial hardship” during the previous year. Another study found that 66.5% of all bankruptcies were related to a medical issue. The recent crisis is likely only to exacerbate this problem. After all, the coronavirus doesn’t discriminate based on who has health insurance, and it’s not as though insured people with the virus will have time to find an “in-network” provider. So, clearly the impact on the crisis on the medical system as a whole is still unfolding. That said, there are already resources beginning to surface:
As far as medical debt in general, there are a variety of programs and resources to consider:
The impact of the coronavirus on small businesses cannot be overstated. According to one report, “96 percent of small business owners are already feeling coronavirus impact.” At least 21 states have ordered lockdowns on several types of businesses (The Wall Street Journal has a good rundown of them).
There are serious concerns about rising unemployment and the wider impact of these closures — temporary as they are — on the economy as a whole. There will be financial aid packages to small businesses and money for unemployed workers, though many of the specifics are still being considered by Congress and state and local governments. For now, here are a few resources to start with:
Student loan debt is a huge and growing burden on Americans. If you have a hefty balance on your federal student loans, you’re not alone — according to the NY Fed, 44 million+ borrowers owe $1.5 trillion on their student loans. And even before the coronavirus, borrowers were having trouble keeping up, with 11% of those student loans 90+ days delinquent as of the end of 2019.
For those borrowers already in collections, there’s some good news. The Department of Education in halting debt collection for some borrowers who are in default. This includes “wage garnishments, offsets of Social Security payments and interceptions of federal tax refunds.” Note that this only applies to federal student loans held by the U.S. Dept. of Education and it doesn’t apply to private student loans.
For federal student loan borrowers who are current on their payments, more help is here: On March 20, U.S. Secretary of Education Betsy DeVos announced that the office of Federal Student Aid is providing student loan relief to its borrowers during the COVID-19 national emergency. The relief package helps federal student loan borrowers in two distinct ways:
Here are some resources to help you take advantage of this relief program:
If you have private student loan debt, the federal forbearance program doesn’t apply. However, if you are in danger of falling behind on your private student loans, you may be eligible for deferment, forbearance or other assistance program. Here are some tips:
In times of crisis, housing and food should be our two top priorities. Whether you own your home or rent, your next payment (or next few payments) is likely top-of-mind right now. Like other lenders and creditors during this crisis, a large group of mortgage industry companies are working on a plan for relief. This is a rapidly changing situation, but here’s what we know right now:
Car payments are another source of concern for Americans. In 2019, the average monthly car payment was $544 for a new car and $391 for a used car. That’s a lot of cash when your income has been lost or significantly reduced. But most banks and credit unions don’t want to see you default on your loan (or face repossession) and are willing to work with you.
As more and more Americans struggle to come up with money to pay the bills, many will turn to personal loans as a lending vehicle. Why? The interest rates on personal loans are typically lower than credit cards, and because the payments and interest rates are often fixed, they can be easier to budget for.
And for people who already have personal loans and are now finding it difficult to make payments, many lenders are already offering programs to defer payment for a period of time. Though keep in mind, these loans are likely to continue to accrue interest, so while you won’t get hit with late fees, they will continue to grow.
If you have a personal loan you can’t afford to pay right now, reach out directly to your lender to learn what your options are, and be sure to ask about interest rates and accrual, the impact on your credit and how long the program will last. Here are a few resources that can help you figure out what to do about existing personal loans and how to evaluate any new loans you might be considering.
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