Coronavirus Debt Relief
The world's largest lenders have approved debt relief packages for more than 25 African countries, according to the head of the International Monetary Fund, but a moratorium on debt service alone will not prevent a widespread debt crisis, as so many countries already face solvency problems. The world's poorest countries are unlikely to seek debt relief under a program by the Group of 20 major economies because it could hurt their economies.
If you have difficulty paying loans or debt due to COVID 19 or related circumstances, contact your lender, credit service provider or creditor to discuss options. If you know that you cannot make payments due to COVID 19, please contact your creditor. You may be able to skip payments if you are financially overstretched, but please do not skip payments until you have contacted the creditor or lender directly to see if they are willing to help you.
Consumers will have to take advantage of debt relief programs, while others will contact their creditors directly and receive only temporary relief. If consolidation is not an option for you, or if your creditor or utility company does not offer options to help you make ends meet, you may want to consider a different approach. You can choose a creditor who offers you debt relief directly, or you can use a reputable debt relief service.
In some cases, your credit counselor may be able to help you with a form of debt consolidation known as the Debt Management Program (DMP). In summary, consumer credit advisory programs allow you to update your payments on an ongoing basis and reduce the interest you get on your debt faster. A credit counselor can often help to lower the interest rate, pay less fees and pay off certain debts faster, typically within three to five years.
If you don't want to use this program but can afford to pay at least the minimum monthly payment, the debt snowball method is recommended. Technically, this is not a debt consolidation plan, but the do-it-yourself method simplifies monthly debt payments and feels like "debt consolidation."
If you are struggling with debt collection claims or are afraid of falling behind in paying off your debts, it is time to take more serious action. Have a financial plan to pay off your debts, save money and start a debt relief program, whether you use the snowball or avalanche method. Even if you don't get rid of all the debt, you can write yourself a cry for help or a letter, and this gives you the chance to focus on how you will pay off the debt. While you may be paying off debt for the rest of your life, you are making the minimum payment and hoping to be debt-free one day.
If setting up multiple automated payments on your debt does not meet your goals, the next consideration involves what we call debt restructuring. Automatic payments for debt can be set up to save some of the stress, remember when and how to make payments. Consolidation of your debt can involve two forms of debt restructuring: credit card consolidation and home debt consolidation. Two common forms of this approach are transferring the balance of a debt to a single credit card or repaying debt using home equity.
Whether this method makes sense for you depends on what kind of debt you currently have and whether or not you should consolidate your debt. With many student loan programs, you need to look closely at what is offered under the CARES Act and what kind of student debt you have.
You would need to contact your credit provider to discuss your other loans, including private student loans. If you already have credit card debt, look into the existing SBA and start the Paycheck Protection Program. You can also contact existing lenders for more information about the CARES Act and other student loan programs.