The COVID-19 crisis has hurt the financial health of many households. While governmental stimulus helped, millions of Americans lost their jobs. This contributed to increased debt levels for many Americans. Finding ways to prevent debt from growing in a crisis can help families keep their finances in order.
Slow Down Debt Payoff
When there’s a crisis, it’s a good idea to slow down any accelerated debt payments. Hoarding cash can provide a cushion should a household breadwinner lose a job. Maintaining minimum payments is generally a good idea, but the federal government provided options for the deferment of some loans. Student loans and mortgages were among the loans that borrowers could put off for a time. The debts will still be due at a future date, but the forbearance can allow borrowers to stash cash for the short run.
Find A Balance Transfer Offer
Those who have credit card debt frequently find that the interest rates they have to pay are excessive. It’s not unusual to find interest rates that exceed 20% on credit cards. Balance transfer credit cards offer borrowers the opportunity to benefit from an interest-free period. This can allow borrowers to pay off their principle on an accelerated basis even when they pay the minimum each month. Balance transfer offers might be a bit more difficult to obtain as the economy takes time to recover from the pandemic recession, but those who can get them could benefit greatly
Build An Emergency Fund
It might be difficult to build an emergency fund at present, but as things begin to stabilize, it is important to build an emergency fund. Those who are able to build up a three to six month emergency fund are prepared when it starts to rain. A healthy emergency fund is a great reservoir of cash that can help people from building up debt. The best way to build a healthy nest egg for emergencies and retirement is avoiding interest payments that do nothing but enrich the bank.
Incurring debt means that someone else has a claim to a household’s money. This could be a bank or a mortgage company. That’s why it’s important to avoid having debt pile up. Every dollar paid in interest is a dollar that cannot go toward building wealth for the long term.