Every week, we’re realizing just how deeply the coronavirus pandemic is impacting our jobs and finances. Over the past four weeks, about 22 million people filed for unemployment, and with most Americans having less than six weeks of pay in savings, a sudden job loss might leave you panicking to find a way to pay the bills. Though stimulus checks are now starting to be deposited, it might be weeks or even months before you actually see your $1,200. Until then, what other options do you have? We spoke to financial expert Paco De Leon of the Hell Yeah Group about what you can do to delay bills or receive assistance from other sources right now.
Loan deferment or forbearance
If you’re worried about paying loans right now, there are a few options. When it comes to student loans, there’s what’s called a deferment — a suspension of payment with no interest accruing on subsidized federal loans. There’s also another option called forbearance, which is a suspension of payment with interest accruing. Until September 30th, federal student loan payments have been suspended, and though it’s technically in forbearance, interest rates have been set to 0%. You can also request a refund for any student loan payments you made up until March 13.
For private student loans and other kinds of loans — whether it’s a mortgage, auto loan, or a personal loan — you may have to approach each lender separately. De Leon offers some strategies to use when calling your bank or credit card company. “I’ve heard anecdotally that you should make sure to mention that your ‘financial hardship is a direct result of COVID-19,” she says. “As someone who has worked in a bank call center as a collections agent, the specificity of this does not surprise me one bit.”
She warns, though, that it might take a while to get through to someone. “Credit card companies and lenders are likely experiencing an influx of people contacting them for payment assistance, so they might be very overwhelmed,” she says. “One thing I remember from the 2008 crash was how the bank's infrastructure couldn’t handle the influx of foreclosures. In other words, customers got information from one person at the bank that conflicted with the next bank rep that they spoke with. Right now banks are also probably hiring a lot of new people to deal with the new programs and the general uptick in demand, so make sure to trust but verify, and document everything by keeping a record of your correspondence — just in case.”
You should also be aware of what the process of requesting deferment or forbearance generally entails. “When I worked at the bank, people would request 3-month extensions on their auto loans. In order to request it, they needed to send us a hardship letter and then the request needed to get approved by a supervisor,” says De Leon. Whether this process is being streamlined due to the special circumstances of COVID-19 varies from lender to lender. “Just be aware that depending on the type of loan or debt it is, lenders might have their own process for evaluating your request for payment assistance,” she says.
Grants and emergency funds
The federal government hasn’t done enough to help people impacted by Covid-19, but fortunately, there are resources outside of the government if you need financial assistance right now. Local communities have been forming mutual aid funds and grants, ranging from helping the general population to LGBTQ+ and POC communities, specifically. The Freelancers Union has a relief fund that will give each household up to $1,000. Artist Relief is giving grants of up to $5,000, and One Family LA is giving assistance to low-income and immigrant families in L.A. most severely impacted by Covid-19. There are many other local, city-wide relief aid programs as well.
“There are local funds for restaurant workers and bartenders, a writers and authors emergency fund, and funds to benefit the people in the entertainment industry,” says De Leon. “Talk to your community, research to find out what may be available locally. It’s unclear what additional relief options will be created by the government, because it’s unclear how bad the damage will be. I know that’s not the answer people want — but that’s where we’re at right now.”
Withdrawing from your 401k
If you’ve made any investments into a 401k or similar accounts, you might be wondering whether you need to withdraw. It’s not a decision to be made lightly, and many financial experts advise against it — but it’s understandable that you may be considering it during an emergency.
De Leon says that the stimulus package passed on March 27 addressed some of the concerns surrounding retirement accounts. “The CARES Act enables people to take an early withdrawal without paying the usual 10% penalty,” she says. “You’ll still be taxed on the money, but the relief bill will allow you to spread out payment of those taxes over three years.”
“Another option your retirement plan might allow is borrowing money in the form of a loan from your retirement account. You’d need to pay it back. The terms on the loan will vary with each retirement plan,” she continues. “Check with someone in HR to find out what your options are. General financial wisdom says don’t touch your retirement before retirement, but this new law might encourage people to do just that. This is a hard decision to make; it’s a very personal decision. You should realize you’d be setting your retirement savings back, not to mention selling when the market is already down.”
Credit card points and unused gift cards
If you’ve been judiciously racking up credit card reward points for the past decade or longer, you might be able to use them in a more helpful way than flights or hotel bookings right now. It’s a good time to review any rewards or perks that come with your credit card, because you may be able to use the points toward groceries, other necessities, or get a credit toward your bank statement. “If you have credit card points, check to see if you can redeem those for cash back instead,” De Leon says. If you have gift cards you haven’t used yet, she also suggests selling them online on sites like CardCash.
Did you know that you might be owed money you’re not even aware of? It sounds like a scam, but it isn’t — unclaimed property is money that already belongs to you that for some reason you haven’t received. It could be an uncashed paycheck, a refund, money from an old bank account, even inheritance or pension payments. Whatever it is, the money that never reached you is being held by the state. It’s incredibly common to have some unclaimed money or property. There are billions of dollars in unclaimed property in the U.S., with high-end estimates in the range of $80 billion.
“Yeah, unclaimed property is totally legit,” says De Leon. “My wife found a few hundred bucks that way a few years ago. Everyone should definitely check with their state; it’s absolutely your money! The state will mail you your money via check, so it’ll take some time to get to you.”
Search for your state’s unclaimed property office to see if this applies to you. You don’t need a third party to claim it, and offers to help you get this money may actually be scams. You should check for every state you’ve lived in.
And remember that if you’ve been laid off, furloughed, or have had your hours or salary reduced, you’re probably eligible for unemployment benefits. The CARES Act broadened unemployment insurance eligibility to cover most people whose income has been affected by Covid-19, including independent contractors.