In the past nine to eleven months, the current economic crisis has caused various financial and social issues in several industries. Although much of the companies that we know of have migrated digitally, they’re still quite vulnerable to the effects of the current economic recession caused by the plummet of foot traffic and demand in certain industries. This includes various companies and businesses that rely on monthly payments, such as apartment complexes, car loans, and credit card issuers.
Although most businesses are starting to re-open as confidence surges with millions of vaccines are being produced, we’re not out of the woods just yet. Many businesses will have to take drastic measures in ensuring business continuity, and one of the best ways of getting a financial boost is through loans. However, the ever-increasing debt in the United States and around the world have become worrisome. In fact, there’s an increase of around 100 million skipped loans since the start of the pandemic in the United States.
Debt During the Pandemic
Having loans is not necessarily the problem in this situation, but it’s the unemployment rates around the world. This is to be expected when industries and small-to-medium sized businesses are forced to cut down on monthly costs by cutting down on staff or partially “furloughing” the workforce. ; As such, the ability of most individuals to pay loans and much of their monthly expenses is severely hindered. This means that much of the general population will have even fewer options, with some of the public not making regular payments.
But even though individuals might not be able to pay most of their debt monthly, there are still some possible options. But other than just being able to pay off your debt, how do you effectively manage your credit score, even during an economic crisis? Here’s what you can do.
Loan Negotiation and Extension
Remember: you’re not the only one that’s having financial problems throughout the pandemic. Companies and loan agencies alike are also having their own issues and problems. That said, agencies, banks, and mortgage providers are quite aware that they’ll need to give their consumers an extension to their loans, or at least a flexible payment to ensure that they’ll be able to pay for essentials.
You might want to contact companies that you have a monthly payment for. This includes cellphone companies, telecommunication services, banks, and other service providers. You’ll need to explain to them the context of your situation while presenting documentation. In some areas and countries, there are assistance programs that can help you through financial instability.
Negotiations are important when it comes to having a clear discussion on your payment terms so that both parties can set a realistic and mutual understanding of goals. There are bound to be programs that are related to credit reporting firms. Still, transparency is key when it comes to your situation. Let your creditors and agencies know if anything changes your situation, especially if you get a new stable job.
Fortunately, there are understanding and hassle-free mortgage lenders who can help you through tumultuous times during the pandemic. This is a good way of ensuring that you won’t have to pay an exorbitant amount while still having the financial means of supporting yourself throughout months.
Keep the Money Flowing
Although you’ve accepted that you can’t necessarily make full payments on time, it’s still important to do whatever you can in your power to make timely payments, even if it’s not the full amount. Most experts would suggest paying the minimum amount that’s required on your accounts. Having a timely payment shows your willingness to pay while also meeting certain deadlines.
Be Careful When Using Your Credit Card
Lastly, you want to keep your credit card spending at a minimum. This is an essential lifeline if you’ve just been laid off or have been unemployed for a long time. Remember: needs and essentials first before wants.
Also, it’s important to keep track of your credit utilization ratio. Most credit cards will have a total credit limit, so if you have a limit of around $10,000, your ratio should be half of it, which is around $5000. Most credit card issuance agencies would suggest having a ratio of around 30% of your credit limit.
There are different ways of managing your credit score, even if you don’t have the financial means of paying your debt and loans on time. Still, you must remain transparent and straightforward with your lenders and creditors regarding your situation. Most lending agencies are understanding and considerate in giving an extension during times of need.