8 steps to take if you have financial problems due to coronavirus - ForumDaily
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8 steps to take if you have financial problems due to coronavirus

The coronavirus pandemic leads to the fact that many people lose time and money, so it is more important than ever to know what financial opportunities you have. Writes about this CNBC.

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Almost 80% of Americans live from paycheck to paycheck, and many families say that it will be difficult for them to pay even unforeseen expenses of $ 400. Losing shifts or firing during this time can exacerbate the already dangerous financial situation of many people.

What can be done to make ends meet during a coronavirus pandemic.

1. Contact lenders right now

If you are concerned that it will be difficult to pay off your credit card balance, student loan debt, or utility bills in the coming months, the National Consumer Rights Protection Center recommends contacting your creditors as soon as possible and asking for permission.

Banks, including Capital One, Chase, Citi, and Wells Fargo, are asking their clients with economic difficulties to contact them to see what they can do. Credit unions also offer loan assistance. In addition, you can subscribe to a tariff plan, which may mean lower interest rates or lower fees and penalties for some time.

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Many utilities, including large suppliers like ComEd, Duke Energy, FirstEnergy, and PSE & G, offer electricity billing support programs that can allow you to defer payments until a later date.

If you have student loans, contact your service provider to find out what options you have.

2. Create an “emergency” budget

NCLC also recommends creating a “leaner” version of your typical budget that is reasonable, whether you currently have difficulty or not. But this advice becomes doubly important if your work hours are shortened or shifts canceled in the coming weeks.

To do this, “make a list of all your current obligations,” the NCLC advises. “Circle all the essentials to see how much you could actually save if you pause your channel subscription, limit your travel, and cook at home.”

3. Consider a personal loan option

Personal loans average between $ 10 and $ 000, with a typical term of three to five years. They can help in times of lack of income. They are offered by banks, credit unions and online lenders such as SoFi and Payoff.

The better your credit rating, the lower the interest rate that you will be offered on the loan. The average APR offered to borrowers with a credit rating above 760 is just under 10%. This is significantly less than the average credit card rate of 0,08%, which can make a personal loan a better option than using a credit card in case of emergency.

If you already have a personal loan, contact the bank, there they can offer you more favorable conditions.

You can also access your home equity line of credit and borrow the value of your home, if you have one. But be aware that this strategy has potential weaknesses, including upfront costs and potentially high interest rates if you do not have a good credit rating.

4. Use the product with the lowest interest rate

Use your card with the lowest interest rate so that you pay less interest when paying your bill. Even a few percentage points difference can save you a lot of money when paying interest.

One option is to look for offers with low interest, be it a credit card or a credit line with 0% APY for a certain period of time (usually 12 or 18 months). This will give you some respite if you have trouble meeting your financial obligations in the coming weeks.

Again, people with a higher credit rating will qualify for better deals, so if you have a low rating, use the cards you already have before applying for a new card.

5. Send letters of temporary difficulties

If you are having trouble paying your mortgage, your first step should be to find a lawyer. Then you should write letters about temporary difficulties to creditors, for example, your mortgage company, to find out what options you have.

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6. Use community help programs

The government is currently working on a policy to help Americans who are short of cash during the crisis. But there are already many other resources offered by communities and local governments across the country.

7. Attract retirement savings

You can also use your retirement savings, although financial advisers say this should be a last resort. If you have a Roth IRA, you can withdraw your contributions without taxes and without fines (but not at the expense of an increase in investment).

If you do not have a Roth IRA, you can take a loan from your 401k. This way you will avoid fines, but you will have to pay them back within five years.

This way is fraught with many shortcomings: you will lose any potential growth of investments during the term of the loan, and if you cannot repay the loan within five years, you will have to pay taxes and other penalties. If you quit before paying off your debt, you will have to pay off the entire loan within a few months to avoid fines.

8. Avoid Instant Loans

If possible, avoid instant loans, otherwise called cash advances. These loans are easy to obtain, they can be useful in times of extreme financial pressure, but they are incredibly expensive. According to the Bureau of Consumer Financial Protection, the average APR for a payday loan is almost 400%. Even a high interest rate credit card has a significantly lower APR.

They can also catch lenders in a debt trap. They are designed for payment at a time, usually within two to four weeks after taking a loan. After that, you will be charged fines and payments if you cannot repay them. You better accumulate credit card debt than use these loans.

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