After the outbreak of COVID19 pandemic, debt repayments have become difficult. While several people are managing to ride out, some have gone bankrupt. The invisible threat has hit the economy very hard and it is not expected to bounce back very soon, at least not before two to three years. When the economy underwent the lockdown period, the government came up with a scheme of payment holiday. Under this scheme, you are not supposed to pay off your debt for a period of three months from the date you enrol for it.
According to the recent guidelines, you can apply for the payment holiday until October 31. However, it should be perceived as you are completely free from your obligation. You will start making repayments when the scheme comes to end. Even though the lockdown has been lifted, people are still struggling to bounce back. Many businesses are still shut down. Most of the employers have made their employees redundant.
While money has stopped coming in, it is hard to make the essential expenditures. if you have already availed yourself of payment holiday, you cannot put off debt repayment. Of course, you will have to dip into your savings along with the meagre or minimal income you are able to earn in amid of the pandemic. If you have multiple debts from multiple private lenders in the UK, the problem becomes more serious.
You may have an auto loan, bad credit loan, and credit card bills. Paying all of them outright cannot be possible when you are running out of money. This is the crucial time when you have to be strategic to stay afloat. If you are struggling with repayments of multiple debts, you had better consult a financial advisor,. They can look over your financial condition and frame a repayment plan leaving enough room for meeting other expenses like food, utility, and the like.
Prioritize your debts
Your first strategy should be prioritising your debt. There is no problem as long as you can manage to repay your debt, but complications arise when you cannot manage them simultaneously. A rule of thumb says that you should prioritise a debt with high interest rate.
For instance, if you have credit card bills and bad credit loans, you should give priority to the former because they attract a higher interest rate than the latter. At the same time, you need to focus on the repayment of loans that are secured. For instance, if you have a mortgage or auto loan, you should try to repay them before other loans because you will lose your home or car otherwise.
Some financial advisors can also recommend you taking out unsecured loans for bad credit. These loans are personal loans borrowed to consolidate multiple debts. If you take out this loan for consolidating other debts, you will pay off all of your loans outright and you will have left with only one larger loan to pay off – unsecured loans. Since you will be repaying your loan in installments, it will be much easier to repay this loan.
However, do not forget to research beforehand because each lender follows different interest policy. Make sure that you have picked the lender offering such loans at competitive interest rates. You should ask your friends and colleagues while making a decision. Read online reviews and dive into social networking sites to know if the lender has reputation and borrowers are satisfied.
Increase income
Well, it may not sound relevant to make such a suggestion when the economy is already shattered, but not all businesses have collapsed down. Of course, if you have lost your job, you will sit back. Update your resume on job portals and let all of your connections know on LinkedIn that you need a job. You will likely get a referral from those connections to their companies.
In the meantime, you should try to work as a freelancer. Several freelancing sites are out there where you can show your skills and get projects from your clients. Most of the people think that freelancing platforms are suitable for only writers, but this is a myth. Web designers, web developers, banner designers, logo designers are some of the popular profiles you can see flooding in freelancing sites.
Managing dues in amid of the pandemic can be tough, but it is not impossible. You need to be strategic. If you are not able to decide from where to start, you should consult a financial expert. They will be able to suggest a repayment plan based on your current financial condition. In addition, you should try to increase your income sources and create a budget in order to avoid overspending. When it comes to managing dues while being a tight spot, you must spend every dime carefully.
