Whether you’ve had your hours cut, your job is on hold or you’re working from home, you may be dealing with financial uncertainty.
And, if you’re paying off debt, you might be wondering what you can do to make everything more manageable. The good news is: There are steps you can take now to help you deal with debt in the age of coronavirus.
1. Review your minimum payments
During this time of transition, you want to be in control of your money and stay in good standing with your debt. No need to hurt your credit now! The first thing you should do is review all of your loans and write down each minimum monthly payment.
You’ll want to know what the minimum payment is for each loan so that you know what you need to pay. While paying more than the minimum is ideal to get out of debt faster, it’s ok if you can only afford the minimum at this time. This means you’re taking action and keeping everything moving along.
2. Call your lender/loan servicer
After writing down all of the minimum payments and reviewing them, take a moment to consider how you feel about this exercise. Did you feel like, “Yes, I can do this” or “Uh oh, I’m not sure I can swing all of this”? If it’s the latter, don’t fret. If you’re unable to pay the minimum on your loans, contact your lender or loan servicer.
Due to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, your federal student loan payments are on pause until September 30, 2020.
You also have the option to switch to an income-driven repayment plan after September 30. These plans make student loan payments a fraction of your income. If you’ve lost your job or have very little income, you can even score a monthly payment of nada. Yep, nothing. Zero. For no income or low-income borrowers, you can have zero dollar payments. This plan can help keep you in payback mode without defaulting.
If you are currently in default, the Department of Education just announced that they are halting all wage garnishments, tax refund offsets and Social Security withholdings for federal student loans. This means that if you’ve defaulted and Uncle Sam is trying to get his money back through the means listed above, it won’t affect you until after summer.
Some other tips: If you have a credit card, you can call your lenders to see if they’re able to provide any assistance during this time. And, some mortgage payments are being put on pause for a couple of months in some states, so check your local authorities or call your mortgage lender.
The point here is that you can take actionable steps if paying back your loans becomes an issue.
3. Use the $1,200 check to your advantage
As part of the economic stimulus package, each person making less than $75,000 may be eligible for up to $1,200 in assistance. If you’re dealing with debt, consider using some of the money you qualify for to pay your bills or boost your emergency fund (if you can afford it).
This relief check, while not a ton of money, can help you get through a tough time and stay on track with your bills and debt repayment.
4. Consider refinancing
On top of the $1,200 check, the Federal Reserve also cut rates to practically zero. This is a way to try and boost the economy. If you own a home, these rates may make refinancing your mortgage attractive.
5. Adjust your budget
Now is a great time to adjust your budget, especially if you’re dealing with debt. For example, if you were putting a lot more toward debt than the minimum, now might be the right time to funnel more of that cash into your savings account.
So, take the time to do a financial review of your emergency savings. Many people recommend three to six months’ worth of expenses.
If you’ve lost your job, you may need to cut out your extra purchases and only focus on the essentials. You may also need to put your debt payments on pause during this time.
Using these five steps can help you take control of your money. And this will help you get through this difficult situation. Just remember: You’re doing the best you can.