You could be asking yourself if debt consolidation during a pandemic is a good idea as the country battles its way through the COVID19 pandemic. The number of people affected by the virus is increasing every day that the country has far exceeded the numbers that China and Italy had in terms of patients afflicted with the virus.
There are some places where Americans are told to shelter in place and only essential businesses are allowed to operate. This puts a strain on the economy as well because SMEs are feeling the pinch. As people are staying in, customers even for those that remain open are coming in too far in between. The result, businesses are folding and employees are being let go.
Regular workers are feeling the pinch especially those that are living from paycheck to paycheck. A pause in the regular flow of their income can prove to be disastrous. Purchasing essential goods will start to become a challenge much more for their debt payments. This is why some people are thinking of debt consolidation during a pandemic that will help them manage their debt payments. If you are thinking about it, here are some of the benefits of consolidating your debt.
It gives you fewer things to think about
One of the advantages of consolidating your financial obligations is that it gives you fewer things to worry about. With the health pandemic going on sweeping through the nation, you could be thinking about a lot of things all at the same time. Your health would be on top of that, making sure you have all the essentials you need at home and many others. This is important as Newsweek shares that more Americans are stressed out with the coronavirus pandemic compared to the Great Recession.
Debt consolidation during a pandemic offers you the chance to cut down on the number of things you have to think about. If you previously had five different credit cards, combining them under one account takes away a lot of items to attend to every month. This helps you focus on crucial areas of your finances. It can be looking for ways to augment your income flow, making budget adjustments to save money, or even ensuring that you and your family are healthy.
It helps you lower your payment
One of the upsides of debt consolidation during a pandemic is the fact that it can help you lower down your payment over a short period of time. This is if you know really think about the process and even ask help from reliable companies who can help you consolidate your debt obligations. This is important because if you choose to consolidate, you need to make sure that you get the benefits it brings.
For one, it would be a good idea to use your card with the lowest interest rate to consolidate your cards. This will help you bring down the amount you have to pay every month. If possible, get a 0% interest card so you can take full advantage of low payment. Just make sure that you pay everything off before the 0% promo period ends.
If you are consolidating using a loan, you need to make sure that your total payments at the end of the month are lower than what it used to. One way to do this is through your credit score. It should be high enough to give you a low-interest rate on your loan. Check your credit score and make sure that you will be able to take advantage of it when taking out a loan.
It frees up much-needed funds in the process
Once you start to make smaller payments, you will notice that you start to free up some money in your budget. This is what you need to help you through these trying times. Extra money on hand can be a big source of relief and can significantly lower down the level of financial stress you are feeling at the moment brought about by the pandemic.
It frees up your card for extreme emergency
Credit card debt consolidation during a pandemic can give you the chance to focus on one payment every month. Once you consolidate your card payments, one of the cardinal rules you need to observe is that you have to watch how you charge on your card. It is advisable not to use your cards until you pay off the consolidated account first.
However, these are extraordinary times and when the need arises, you can use your card for emergency situations. It is even possible to use it for your essential needs such as food and water. Keep in mind that this should be an exception rather than the rule. One benefit you get from this decision is that you have the option of paying only a portion of what you spent every month. This helps you extend the actual cash you have on-hand to help keep you feel more secure.
What to look out for
Now that you have an idea of how debt consolidation during a pandemic can help you manage your finances during this pandemic, there are a few things you have to be aware of to help you stay away from further financial trouble. Here are a few them worth looking into.
Do not give in to temptation
As mentioned earlier, consolidating your debt can help you free up your credit cards for extreme emergencies. However, you need to control your spending very carefully since the temptation to spend is there. You might start to think that one shirt or a pair of shoes won’t hurt but when you finally need to use your card.
This is why you need to be more mindful of the way you use your credit cards after consolidating your debts. Guard your impulsive buying behavior and make sure that you only spend for whatever is necessary.
Not reading the fine line
If you choose to take out a new credit card with 0% interest, you need to remember that it also comes with a timeframe. You can enjoy that 0% rate for a limited time and once that period lapses, the rate can go back to normal. This is why you need to make sure that you pay off everything before that promo period expires.
Apart from that, you also need to take a look at the penalties and fees your lender will impose once you miss even a single payment. It is a possibility that your lender will bill you for the entire amount and not just the minimum payment once you miss a payment due date. You could find yourself in deep trouble and this can ruin your finances even more.
Not watching how you spend
Once you consolidate your loans, you have to be extra careful with how you spend your money. This is the best time for you to stick to your household budget. This is important as CNN shares that only about 41% of Americans have a budget. You never know when this pandemic will end or how long it will take for a cure to be developed and rolled out. While waiting for the unknown, it is ideal to carefully monitor your expenses by sticking to your budget. If needed, make adjustments along the way to make sure that you are able to save as much as you can during this time.
Debt consolidation during a pandemic during this health crisis can help you manage your payments better and even free up much-needed funds in your budget. You just have to keep in mind that you are just essentially moving debt around and that you still have to pay back your lender.