Long before the coronavirus pandemic shattered the finances of millions, many people were struggling with their personal finances. Many households find themselves living paycheck to paycheck as they try to cover the bare necessities. So, when things pop up out of the blue (as they often do), finding the money to resolve the problem is especially stressful.
Before you allow the stress and anxiety to prompt you to make a decision you’ll regret later, consider taking these steps to get out of a financial jam.
Determine How Much You Need
You can’t devise a plan if you don’t first know all the facts. When faced with an unforeseen financial emergency, the first thing you should do is figure out how much you’ll need to resolve the matter. If it’s a car or home repair, call around to some contractors or mechanics to get a free estimate. If you’ve been fired or laid off, review your budget to see how much you’ll need to survive for a few months. If it’s a past-due mortgage or utility bill, contact the service provider to find out how much is necessary to prevent foreclosure or services from being shut-off.
Look for Assistance
There are certain life emergencies that may qualify you for free or affordable assistance with the things you need. For example, if you’ve been laid off or fired, you can apply for cash, food stamps, health insurance, rental assistance, and unemployment benefits. Depending on how your car or home was damaged, insurance may cover all or most of the bill. If you’re behind on your utility bill and are considered a low-income household, you could qualify for financial assistance to get caught up.
Check Your Budget and Savings
Depending on how much the financial emergency is, you may find that you do have enough to cover the costs. Review your household budget to see if you have an excess income you can donate to the problem. You can also check your personal or emergency savings accounts to see if you have money there you can use. Just be sure to develop a plan in your budget to replace the money over time in case you need it in the future.
Work Out a Resolution
Some financial emergencies, like a past-due bill, home, or car repair can be worked out by talking to a service provider. Contact the account holders for the past-due bills. Explain that you’re going through financial hardship at the moment. They may be willing to negotiate by lowering the amount due, removing late fees and penalties, setting up a payment arrangement, or accepting a goodwill payment. If you need a car or home repair but don’t have all the cash upfront, you could talk with the contractor or mechanic and either negotiate a lower cost or ask to pay in installments. If you have a sizeable downpayment and decent credit, they may be willing to work with you.
Consider a Short-Term Loan
If the above-mentioned steps aren’t enough to cover your financial emergency (or you aren’t eligible), then you can consider an option like short-term installment loans. These are loans you can qualify for fairly easy. There’s no credit check and no lengthy paperwork meaning you can get your approval in minutes. Once you receive your funds, you are provided a repayment schedule to repay the loan in full. As long as you can afford the repayment option provided, a short-term loan could be your quick solution to getting out of a financial jam.
Charge it to a Credit Card
While it is highly recommended that you use credit cards wisely, if your financial emergency is serious enough, it may be worth it to use your card to cover the cost. Just keep in mind, a high usage percentage and debt to income ratio can have a negative impact on your credit. Not to mention, the longer it takes you to pay off the credit card, the more you end up paying in interest. Therefore, be sure that you start making regular monthly payments on the card to get the balance paid off.
Sometimes, life deals you a bad hand. Something goes wrong and suddenly, you find yourself in a financial jam trying to resolve the problem. Before you make a decision you’ll regret later, take a few deep breaths and remember the steps above. By using this process to resolve financial emergencies, you greatly reduce the amount of debt you acquire.