It is equally unfortunate but true that job loss is one of the most stressful and difficult moments in our lives. As if this is not enough, you stop getting your regular pay and then there are fixed expenses such as credit card bills that pile up.
If you've recently found yourself unemployed but still have credit card debt to manage, follow these 6 crucial steps to take control of the situation as much as possible: If you've recently found yourself unemployed but still have credit card debt to manage.
1. Check Your Financial Status As It Currently Is
The first stage is to establish the baseline of your financial position so that you can be able to see what you are working with. Take an account of all other expenses that you incur monthly such as house rent or mortgage, bills, food, transport fare, and of course, any credit card balance that you incur including the interest and the minimum payment that is expected of you. Then, list some of your existing streams of income such as severance pay, withdrawals from your savings account, and if you have been approved for unemployment benefits, then include that as well as any income coming from a working spouse or any part-time job. This income/expense statement will demonstrate how much money is available each month as well as how much is being used.
2. Make Difficult Spending Cuts
This typically implies that there is low or no steady income to cater for the expenses you incur hence the need to lay down somersets when it comes to spending money. Analyze your expenditure plan and minimize expenses as much as possible, including meals, electricity, and so on. Reduce expenses on traveling/ driving often and when at all, use public means, especially for the long distances. Reduce any peripheral expenses that may be deemed unnecessary such as cable subscriptions, gym memberships, and entertainment among others. Each dollar that you can save will be contributed to paying your fixed costs that are crucial to your business.
3. It is recommended to reach out to the Lenders for assistance in Relief Options
The next and crucial step is to make a personal call to your creditors and explain your situation to them so they agree to offer you some form of relief such as a reduced rate of interest, smaller minimum monthly payments, or no fees for being late on payment. Since there is a high unemployment rate, most credit repair companies are introducing special hardship deals. Do not settle for a generalized “we don’t offer it” response, ask directly what other alternatives can they offer. Relief measures will not wipe out debts but they can afford to reduce or suspend the payments during the period of unemployment.
Read More: What do credit repair companies do?
4. Prioritize Debt Payments
Lacking significant resources to employ while engaging in business, you will be required to pay your accounts in full to maintain good standing to ensure that your debts are paid. Pay the minimum on all accounts to avoid late charges and impact on your credit. Next allocate any additional amount on the account that has the highest interest rate possible, to try and minimize the interest expense as much as one can. There should be no focus on lower-interest debts for now, rather, all available resources should be channeled toward the settlement of the most expensive debt. The only thing to watch out for is that no accounts go derogatory because this results in the imposition of penalties and default interest rates.
5. Consider Balance Transfer Options
If you are unemployed then opening new credit accounts can be a challenge but it is worth checking if you can transfer your balances to new lower-rate cards. This can cut the interest expense on the large credit card balances and allow for the cash to be used in other areas. Pay attention to balance transfer fees but, doing the computation, check if it will be worth it due to the amount saved in the long run. Employed people may not be very comfortable with large credit card debts, thus a lower-rate card could come in handy when one is unemployed.
6. Explore Additional Income Sources
Last but not least, the more money one can earn at the moment the better whether it is in the form of unemployment checks, a part-time job, freelancing, or other income sources. If you meet the required criteria for unemployment benefits, apply for them as soon as you lose your job and think of other ways of generating some income by taking up other jobs, renting out spaces you may have at your disposal, selling any items you may have in your home that are not useful to you, or even starting a small business from your home. Just another $200 or $300 a month might go a long way in paying the credit card bill.
While credit card debt is bad for anyone, it is specifically disastrous for those who were once earning a living for their families but are now jobless. However, using relief options, making payments only on essential things, avoiding all forms of expenditure, and coming up with other sources of income through unemployment and other related activities can place you in a position to regain control – even when out of a job. Keep adhering to the prescribed financial plan and keep following all the lenders and government bodies for availing of any possible support options. Financial recovery is a process that requires dedication and focus on proper management of expenses and debts to build one’s financial strength once again.
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