(UnitedVoice.com) – Millions of Americans are staring at bills they can’t pay as state governments continue the economic shutdown to protect Americans from COVID-19. The future looks uncertain and the pressure mounts for states to re-open the economy to let people get back to work. Lurking under the surface is the hidden threat of financial ruin for those who can’t afford to miss even one paycheck.
Mortgage, car, and credit card companies are fielding record calls to delay payments. Ever since states started closing businesses in mid-March, over 26 million people have filed for unemployment. That doesn’t include the millions more who are self-employed or freelancers who are also impacted.
Many of them still can’t file for unemployment until states make the system available to them. In a Pew Research Center study, 43% of adults said that someone in their household lost a job or took a pay cut.
According to a personal finance survey by NORC at the University of Chicago in 2019, 51% of Americans said that if they missed one paycheck, they couldn’t cover their necessities. Another 15% said they would experience hardship after missing two paychecks. What’s even worse is that many families were using credit cards to fill in the gaps to pay for emergencies. After decades of rising prices and stagnant wage growth, COVID-19 was the perfect storm to create a financial disaster for many.
Forbearance Requests Exploding
On April 20, the Mortgage Bankers Association said that 5.95% of home loans — nearly 3 million — were in forbearance as of April 12. As soon as people started to lose their incomes, borrowers began to take advantage of new pandemic-related arrangements with their lenders. Under the CARES Act, mortgage borrowers can go into forbearance for six months with an additional six-month option afterward.
Renters are in a more precarious situation. One in four renters did not pay their full rent in April, according to a survey by Apartment List. Just 13% made a partial payment and 12% did not make a payment at all. Under new guidelines, landlords in many states cannot evict during the declared emergency.
Credit Card Payments
When the economy starts to sputter, let alone collapse, credit card payments are usually the first place people cut back on paying. Unlike homes and cars, they are typically unsecured and lenders have little recourse if a borrower stops paying. Entering month two of the shutdown, some are skipping their credit card payments.
Most credit card companies are working with borrowers who are proactive with them. Some are suspending payments a month at a time. However, while payment suspensions will help borrowers stay afloat, it is temporary. In some instances, credit card companies are forgiving interest and possibly some or all of the debt. They are hoping that delaying payments will buy time for the economy to recover and allow people to get back up on their feet and, subsequently, resume their payments.
While the future is uncertain, the most important thing to realize is that you’re not alone. Whatever kind of debt you have, the best thing you can do is talk with your creditors. They can’t help if you don’t reach out. Being proactive is the best course of action to ensure your financial future.
By Don Purdum, Freelance Contributor
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