Dealing with Creditors During a Financial Crisis

The COVID-19 pandemic has impacted American families in ways no one could have imagined, but perhaps the hardest hits have been to our finances. Layoffs, furloughs, business closings, and reduced hours have left millions struggling not to maintain a standard of living, but just to pay important bills like rent and electricity.

Although the government has instituted programs to alleviate some of these financial woes, long waiting periods, required qualifications, and limited program funds have caused delays and frustrations. The bottom line is that many people are still desperately wondering how they will make financial ends meet.

A pandemic is certainly an unusual situation, but the financial problems it has caused could happen to anyone, at any time. If you’re ever experiencing any type of financial crisis, there are some steps you can take to alleviate your situation.

  1. Reach out to your creditors

    Ignoring a personal financial crisis doesn’t make it go away. In fact, it can make things much worse. As soon as you realize you’re going to have trouble making payments, contact your creditors to let them know what’s going on. You might be surprised at their reaction.

    For example, during the pandemic, many creditors are waiving late fees, allowing debtors to skip payments, or accepting a lesser amount. Be honest about your ability to pay and your prospects for resuming normal payments.

  2. Protect your credit

    Be mindful of the steps you can take to protect your credit during a financial crisis. The best thing you can do for your credit is to pay your bills on time each month. However, if you are struggling to make your payments on time, see tip #1 above, and then think about the other ways you can protect your credit.

    Avoid taking on new loans or lines of credit during a financial crisis. If you are unable to make payments on your current debts, then taking on new debt will not make the situation better. Be wary of cash advance businesses and payday lenders that lure you in with promises of instant cash, only to leave you with more debt and outrageous interest rates.

    Think through the decision to use your credit card to pay for your bills. Know what your interest rate is and have a plan to pay off any accumulated debt as soon as possible.

  3. Investigate available assistance

    When facing a personal financial crisis like a layoff or reduction in hours, it may seem difficult to ask for help. However, plenty of programs are in place to help people just like you who are in your exact situation, and it doesn’t hurt to reach out and see what’s available. Unemployment benefits aren’t meant to be a long-term solution, but they can certainly help you during a time of need.

    During a crisis like COVID-19, special financial assistance programs may also be added by the government. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, for example, was passed in March of 2020. The CARES Act includes expanded unemployment benefits, provisions for credit reporting, stimulus payments, and relaxed retirement fund withdrawal penalties, among other measures — all of which can make a real difference to your family’s financial and overall well-being.

  4. Above all, don’t give up

    As with any personal crisis, it’s important to remember that “this, too, shall pass.” Rather than throwing up your hands and giving up, try to focus on the positive aspects of your life. The current pandemic, for example, has brought out a lot of good and kindness in people, and we’ve learned that we’re not alone.

    Reach out to your family and friends for recommendations for job openings or opportunities for extra income; you may even find some “temporary” jobs or side gigs you’ll enjoy so much that they’ll become careers. Also, consider selling unused household items or clothing on auction or consignment sites; you might be surprised at how much your old throw pillow or sports jacket will bring in!

    Remember, too, that you have friends at MAX Credit Union. In fact, you’re more like family to us. We’re here for you during this pandemic, and we’ll be here for you in the future.
MAX Credit Union is a full-service financial institution serving Central and East Alabama, including Montgomery, AL; Auburn, AL; Opelika, AL; Prattville, AL; Wetumpka, AL; and Troy, AL.