How to Get Out of Debt During a Pandemic

woman upset about bankruptcy

The COVID-19 pandemic has put over 30 million Americans out of work, and many of those individuals were already struggling with debt before the pandemic hit. Debt can sometimes actually be a good thing, as it allows people to purchase homes, vehicles, and other necessities of life. However, when you incur too much debt, debt can become debilitating and that is not good for anyone. If you are trying to get out of debt during the pandemic, below are some tips that can help.

Identify Your Most Important Bills

Unfortunately, there are some bills you simply cannot get rid of. One of these is your mortgage. If you stop paying your mortgage, you may face foreclosure and end up being evicted from your home. The state government has already lifted the moratorium on foreclosures, so this continues to be one of the most important bills to pay. Also, make sure you continue to pay your utilities so you can continue to have service to your home, and do your best to keep up with any auto and insurance payments you may have. These, as well as any other expenses that are a priority for you, are must-pays and if you do not make the payments, you could find yourself worse off.

Consider the “Leaky Faucets” of Your Budget

You may have expenses that are quite obvious to you, such as your mortgage and utilities. While these are important expenses that should be among your priorities, there are likely some expenses you have not yet recognized. Perhaps that is a subscription that you are no longer using, or the coffee you are purchasing from that expensive cafe once or twice a day. Consider all of the items you pay for on a daily basis and then eliminate the ones that are not absolute necessities.

Create a Budget

Budgets are boring, but they are also very necessary. Using a full quarter of the year, track what you are spending and what you are spending it on. Once you have a full budget in place, it is easy to see how you are spending money, and what you can scale back on. Also, make sure to include within your budget your credit card bills, and the minimum payments you are expected to make every month. When finished, your budget will give you a snapshot of how much money you will have at the end of the month to spend on extras. As long as you do not go over that amount, it will help you get out of debt even faster.

Understand the Types of Debt Repayment

Any debt repayment expert you speak to will likely have advice on how to repay your debt. Generally speaking though, there are typically two main methods:

  • The first is the debt avalanche method, which the majority of debt repayment experts recommend. When paying debt using this approach, you focus on the debt with the highest interest rate first. You continue to pay the minimum balance on all other debts, so you do not face wage garnishment or other penalties for not repaying debt, but your priority remains on the highest interest debt. Pay off as much of that as you can, including going above and beyond the minimum payment. Once that debt is repaid, you then focus on the debt with the second-highest interest rate and continue on from there.
  • The second method of debt repayment is the snowball approach. Contrary to the avalanche method, when using the snowball approach you focus on the debt with the lowest interest rate while still continuing to make minimum payments on all other debt. While the snowball method will not help you save money in interest, as the avalanche approach will, it can provide you with the momentum necessary to stay motivated to keep paying off your other debts.

Both methods work and are very effective if you can stick to them. You just have to decide which one will work best for you.

Use Money Management Apps

You may have gotten used to thinking that your cell phone does nothing but cost you money. However, there are ways in which your phone can help save you money, too. Certain apps can help you with money management, such as GoodBudget, Unsplurge, and Mint. Certain credit card companies also have apps that can help you track all of your spendings without a charge, which can help with your budget.

Another way apps can help you save money so you can pay off your debt is to download apps that offer discounts, coupons, and money-saving tips. Whether these savings are available right in your community or online, you can use the money you save to pay down your debt.

Call Your Creditors

Your creditors might be the last people you want to talk to, particularly when you owe them a significant amount of money. Still, it is important that you do, especially when the amount you have is substantial. Many borrowers are surprised to learn that their creditors are very willing to work with them, and many have shown to be very forgiving during the pandemic.

Thanks to the CARES Act, many creditors are required to provide you with options such as a reduction in interest rates and payments, and you may even be able to make partial payments or get an extension on a payment. In addition to learning about these options, speaking to your creditors will also give you a better idea of what debt you should focus on first.

Call a Debt Defense Lawyer in Florida for Help

Sometimes, borrowers take all the necessary steps to reign in their debt, but it is just not enough. Soon, they find that they are facing legal action from creditors. If you are facing a lawsuit over your debt, our Fort Lauderdale debt defense lawyers can help. At Loan Lawyers, we know the defenses to these lawsuits and we will use them to give you the best chance of a positive outcome with your case. Call us today at (954) 807-1361 or contact us online to schedule a free consultation and to learn more about how we can help.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations.

Contact us for a free consultation and find out more about our money-back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.