Millions of Americans are struggling with late payments toward their loan debt while a huge percentage report that they are unlikely to pay up their loans in full. While the debt crisis in the U.S has been around for some time, the problem has been compounded by the global health crisis due to the coronavirus pandemic. In response to the growing financial challenges and a strain on the economy, the federal government enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help provide relief to millions of affected people and help revamp the economy following the impact of the disease. Some of the measures taken by the government included a temporary relaxation of taxes providing businesses with resources, preserving employment for a majority of those at risk of losing jobs, and providing direct transfer payments for underprivileged families.
Dealing with debt is a stressful experience and when this is coupled with the current health crisis that has wreaked havoc across the world and the U.S in particular, there is little hope for many people who were already in deep debt. But Ryan McAweeney says there are certain ways you can make sure you have relief or deal with a debt that occurred during the crisis.
Talk To Your Lenders
If you realize that you are falling behind the schedule or have missed several payments towards your student loan, mortgage, auto loan, or personal loan, call your financier to explain your current situation. When you do this, you are likely to benefit from accommodations or hardship programs. Some of the benefits that come with these programs include delaying or adjusting your monthly payments or avoiding interest rates altogether. This way, your lender will know you are responsible and may not rush to negatively list you.
Contact Credit Counseling Agencies
Credit counseling agencies are not-for-profit organizations that are established to help people stuck in debts come out and start to reconstruct their financials from the ground up. These experts will assess your financial information, including incomes, expenses, employment status, and what you intend to achieve. Make sure to share all the important information so as to allow the agency to work out the best way of managing your current debt.
Go for a Debt Prioritization Payoff Strategy
The trick here is to focus on paying off loans with higher interest first. Experts also call this approach the "debt avalanche method." This strategy is popular because of its ability to minimize the burden of compounding interest that can increase your overall burden and delay your plan to be debt-free. But this doesn't mean that you ignore small-interest loans but instead, you put more weight on those that are likely to impact you more in terms of penalty in the event you fall behind the schedule. Once you have been able to clear or significantly reduce the balance, you move on to the loan with the second-highest interest rate until you have zeroed out all the balances.
Choose to Consolidate Your Loans
Ryan McAweeney explains, “To consolidate means to combine two or more loans into one loan with manageable payments per month. When you choose this plan, your lender will work out the most appropriate term of the loan while looking at your debt-to-income ratio. This way, you have fewer or just one lender so you minimize the stress that walks with having multiple loans on your back.” Consolidation means you are working with a single lender or credit counselor to focus on making a single payment under a debt management plan. It also implies asking a lender with the most favorable terms to pay off multiple existing loans so that you are left with a single loan. The good thing about consolidation is that lenders wishing to consolidate your loans have been in the industry and understand how to go about negotiating new rates or payment modalities.
According to Ryan McAweeney, working with a reputable financial rehabilitation company that understands and shares your plight can go a long way in helping you manage a sticky debt situation.