Debt was an issue in the US long before the COVID-19 coronavirus came about. Now, with millions unemployed and borrowing increasing day to day, Americans are facing unprecedented financial challenges. As debts soar, managing money becomes increasingly difficult, especially for those who have been forced to stop working or lost their jobs.
What is the situation?
Personal debt was a problem before anyone had ever heard of COVID-19; however, this novel virus had wreaked havoc on businesses and livelihoods, plunging more households into debt. With unemployment rates hitting record peacetime highs in April 2020, and over 4 million confirmed cases of coronavirus, the US being one of the worst-affected countries.
Employment rates are starting to rise after a steep decline in April and May; however, it could take some time for full economic recovery. The longer lockdown measures remain in place, jobs are at risk and consumers are reluctant to spend money. This brings forth a higher risk of falling into debt. For many, this is a terrifying time, but there are solutions.
Managing money advice
The vast majority of US citizens are in debt; however, it must be crucial to state that there is a major difference between controllable debt and spiraling into debt. For those who can continue to pay off loans and mortgages, there should be nothing to worry about. Debt becomes an issue when people are unable to cover the costs of outstanding payments.
This will cause problems with creditors, and it also means that there’s a risk of turning to options like payday loans and credit cards, which carry high-interest fees. It can be very easy to get into a situation where it becomes impossible to pay debts back. The first step to take when facing an uncertain financial future is to analyze and reduce spending.
The next step is debt relief. The sooner people seek advice about improving their financial situation and paying off debts, the better. It’s not always easy to reach out, but there is help available and there are schemes in place to support people who are trying to get back into the black.
It’s often assumed that people get into debt because they have a lavish lifestyle or they spend money too freely. While this may be the case in some instances, most people are merely trying to keep a roof over their heads and food on the table. Once you fall behind with payments, it’s easy to get into a vicious cycle of borrowing and paying interest, which makes it difficult to eliminate debts.
Solutions include credit counseling, debt management plans, and consolidation loans. Consolidation loans are an effective option for people who have multiple creditors. By taking out a single loan, it’s possible to pay off a series of outstanding debts and start afresh with one payment per month. In more extreme cases, where it’s not possible to come to an arrangement with creditors to pay the money back, bankruptcy might be the only option.
COVID-19 has shattered global economies and left millions of people worrying about money. As debts soar, managing money and seeking advice has never been more crucial.