COVID-19 has majorly impacted the health of many Americans. The resulting economic impacts — like business closures, job loss and medical bills — have left many borrowers with even more debt than when the pandemic started too. It can be difficult to deal with extra financial baggage, especially while trying to keep up with the routine costs of living — and stay safe from the virus.
Here are some smart ways to deal with COVID-19 debt, depending of course, upon your situation.
Be Proactive in Communicating with Lenders
While there’s no guarantee lenders will necessarily grant you accommodations, the only way to find out is to ask — and the earlier you start this conversation, the more likely there is to be something creditors can offer to help during tough times. Waiting until after you’ve already started missing payments will generally not bode well for your relationship with the creditor, or your credit score.
All kinds of lenders — credit card, auto, student, personal loan and more — have accommodations in place in case of financial emergency. Be prepared to explain your specific financial hardship, as well as offer an estimate of what you can afford to pay when you call.
The Consumer Financial Protection Bureau, suggests asking these three questions when communicating with lenders about accommodations:
- Do you offer hardship programs for customers dealing with the financial effects of the coronavirus pandemic?
- How would enrolling in a hardship program affect my balance, credit limit and credit scores?
- What are my options if I’m still having financial problems at the conclusion of the hardship program?
Again, early action can make or break the response you get from lenders — so plan to reach out as soon as possible.
Consider Consolidating Debts if Possible
If part of the challenge of dealing with debts is staying on top of all the bills you owe to different creditors and you’re also seeing high interest charges tacked onto your balances, consider looking for credit card consolidation through a bank, credit union or an online company. This strategy can be especially beneficial for borrowers who still have a good credit score.
Some cardholders find it useful to transfer one or more existing balances to a new card that offers no interest, or very low interest, for a certain length of time. Although transferring a balance costs a fee, it may end up saving you more than you’re currently paying in interest — and give you a chance to pay down your debts as aggressively as possible before the interest rate rises.
Another way to consolidate is using the funds from a personal loan to wipe out all your credit cards, then make installment payments on that loan until it’s paid in full.
Know How to Deal with Debt Collectors
Borrowers always have rights when it comes to what debt collectors can and cannot do/say toward them — but did you know you may have even more protections during the pandemic? Know which types of debts have been halted until which deadlines, as well as how to best handle debt collectors during this difficult time. The Federal Trade Commission in particular is a hub for resources on this subject.
Make a Credit Counseling Appointment
Want to talk to someone one-on-one about what your next move should be? Schedule a free consultation with a not-for-profit credit counseling agency to look over your pandemic budget. This professional can point out ways to stretch your dollars, as well as evaluate various debt relief options with you.
Dealing with COVID-19 debt requires some resourcefulness, a dash of proactivity and a willingness to exhaust all your options — but there are options out there.