At some point or another, COVID-19 will pass, and life will return to normalcy. It might not be the same reality as we lived in before the pandemic, but things will start over again. People will go back to work, schools and businesses will open, and the economy will start to rebuild itself. Unfortunately, there will be businesses and people hurting from the destruction the pandemic brought on. This is an essential time for the financially vulnerable to pay attention and be smart. Here are things to avoid in order to rebuild your financial situation following COVID-19.
A payday loan is a high-cost, short term loan for a small amount of money. According to NerdWallet, payday loans are to be repaid with the borrower’s next paycheck, but this can be tricky. If you do not have a reliable income and cannot pay off a payday loan right away, they are trouble. Payday lenders often try to take out small amounts of money from your account in hopes payment will go through. This can trigger bank fees. On top of that, they may begin calling you, your references, or get their lawyers involved. There are times where these situations go to court and leave the borrower in an even worse place before they received the loan. One other downside of payday loans is you have to pay interest on them. You will owe lenders more than the amount you receive from lenders. Not only are you digging yourself in a hole, but you will be out even more money than you were before. The best way to not deal with any of this, is to avoid payday loans altogether.
Personal loans are a bit different than payday loans, but still should be avoided if possible. A personal loan allows you to borrow money and pay it back in monthly installments over the life of the loan. Personal loans typically range from 12 to 84 months. This loan might sound like a good option if you are in a pinch, but if not paid back on time, it can have adverse effects. Your credit score could potentially alter due to missed payments. If you have a good credit score, the damages might not be as extensive. If you have a lower credit score, you will likely have higher interest rates. You will probably owe more than you receive in the first place. Also, if you are out of money, you ultimately have to apply for another loan to cover what you’ve borrowed. Personal loans can also turn into a vicious cycle where you are borrowing, and trying to pay back, then borrowing again. Try your best to avoid personal loans to ensure financial stability!
If you are trying to rebuild your bank account, pay off debt, or recover from pandemic effects, spend smart. This is a good time to split your spending into categories, fixed and variable costs. Fixed costs include things that occur every month like rent, mortgage, insurance, utility bills, and more. Variable expenses are things that don’t happen every month, or non-essentials like clothing, concerts, gyms, and eating out. Following this pandemic, it is essential to pick your priorities. If you can save money but cutting a few things like the gym, or drinks with friends, try to do it! It might seem like a sacrifice, but it will benefit you in the long run. Try to practice smart spending habits when rebuilding your finances.
For more information on what to look out for following COVID-19, contact Mid America Debt Relief. We want to make sure our clients are putting their best financial foot forward coming out of this mess. If you would like to schedule a free 55-minute consultation to learn more, give us a call at (636) 223-5900 today!