5 Important Tips to Deal with Debt During the Coronavirus Pandemic

The pandemic has severely altered our livelihood process and has led to greater uncertainty due to harsh economic realities.

And, this has also resulted in the change of job market structure. As organizations are ramping up their digital footprint and people are increasingly getting accustomed to working remotely, many traditional job roles are getting lost. It has resulted in economic hardship to many and most are increasingly getting into a debt trap.

In this article, we will discuss how to deal with debt during the pandemic and the various options that may be available to you.

• Reach Out to Your Lender:

Paying debt during the pandemic can become a huge challenge if you’re facing financial hardship due to loss of a job or salary cuts/ reduced income. 

In such a case, you can reach out to your lender explaining your financial situation and ask for relief on loan repayments. The lender may offer you relief on loan repayment in the form of a loan restructuring package, loan moratorium, reducing EMI and increasing the scheduled loan repayment tenure, etc. Please note, however, that such facilities are only provided to eligible applicants.

While such facilities could save you from the penalties due to missed EMI payments and negative credit reporting, it is advisable to check your personal loan eligibility, the financial consequences, the overall change in debt and interest cost, possible impact on your credit score, etc. before taking any type of relief package on loan repayment.

Must Read: How to Manage Your Expenses using a Personal Loan?

• Avail Services of a Credit Counsellor:

One of the main roles of a credit counselor is to help people who are struggling with debt repayment to draw up a debt repayment strategy and budget to enable faster repayments.

Apart from private practitioners, lenders nowadays also provide credit counseling services at a nominal charge to their customers. The scope of work of credit counselors includes advice on debt management for charting out a loan repayment plan, negotiating a low-interest rate on behalf of borrowers with lenders, budgeting, and helping debtors avoid bankruptcy.

• Adjust Your Financial Goals:

If you are experiencing disruption in income, you should consider putting your other non-essential financial goals like saving for a car, house, or wedding on pause and prioritize timely loan repayment. Also, avoid borrowing any more money until all your loans have been paid off. Paying off your existing debts and paying your health insurance dues should be your top priority.

Putting your other goals on pause may be disappointing for you, but this short-term setback will benefit you in the long term with easier access to finance and financial stability.

In such an uncertain situation, it is better to have enough liquidity to meet unexpected expenses than to stretch out your finances to meet all your goals.

• Debt Consolidation:

It is a form of debt refinancing, in which you take a new loan at a lower interest rate to pay off all your existing high-interest-bearing loans. The process helps you to save the interest cost, expedite loan payoff and end the hassle of paying multiple loans, which helps you to manage your finances in a better way.

For instance, taking a personal loan to settle multiple loan accounts to save on interest costs and get flexible repayment tenure. This solution is especially suitable if too much credit card debt is the main cause of your financial woes. You can use a personal loan balance transfer calculator to understand the benefits of consolidating your debts and also use a personal loan EMI calculator to arrive at the optimal tenure so that your monthly EMI is well within your budget.

• Beware of Scams:

In dire situations, people look for ways to cut losses and end financial hardship. And, taking advantage of such situations, many scamsters defraud people by promising loan relief measures and making guarantees about debt reduction in exchange for high upfront fees.

You should be aware that intimation of any relief measure should always come directly from the lender upon your application for any such requirements. You should be cautious while dealing with debt relief plans that seem too good to be true.

Is Availing of a Personal Loan a Good Option at Such Times?

With salary cuts or reduced income, it gets increasingly difficult to meet all the end needs, which is quite natural. In such a scenario, you can explore the option of taking a personal loan to meet the shortfall or meet the expenses that you cannot postpone, for example, paying for your child’s education, medical expenses, etc.

Also, the personal loan interest rates are competitive, which makes it an affordable and safe option compared to other options like credit card balance transfer, etc. And, a person with a good credit score and credit history will not have a problem securing the loan.

However, the decision on a new loan in such a market condition should be taken only after much deliberation and exhausting all other options.

Must Read: 5 Ways to Save Money Through a Personal Loan

To assess your eligibility and know how much personal loan you can take, you can use the personal loan eligibility calculator, which provides an estimate as per the financial details provided by you.

Knowing the amount you can borrow helps to calculate your EMI using the personal loan EMI calculator for different repayment tenure and select the one that you can repay easily without impacting your finances.

Dealing with debt can be stressful, but being proactive and following the best practices will help you to manage the situation efficiently.