The long-awaited second round of stimulus is still on the table, but the timeline for which Americans would actually see a new round of aid is still hanging in Congress.
Previously it was the presidential and legislative elections slow down the decision, but with the results coming slowly, it seems that leaders are starting to focus again on stimulus options. Senate Majority Leader Mitch McConnell said he was pushing for a new coronavirus aid bill to be settled by the end of the year.
However, it is still unclear when these checks would actually hit Americans’ wallets. And while a previous Bankrate survey revealed that the $ 1,200 check would not keep struggling Americans going for a month, the stimulus would certainly help cover basic day-to-day needs and other timely payments.
If you have been financially affected by the pandemic, here are six places you can turn to for relief.
1. Communicate with your creditors and lenders
If you’re having trouble making payments on your credit cards or loans, call your creditors and lenders to see if they’ll offer help. For example, you might be able to receive a forbearance, which might help you familiarize yourself with other large payments.
2. Search local community assistance programs
Sometimes help is just around the corner, but you just need to do a little research beforehand to find it.
A good resource for accessing help is 211.org, which connects people to local aid programs. For example, 211 can help you find food, pay housing bills, or other essential services. They can even help you secure free or more affordable internet.
You can also call them on 211 and you will be connected with someone who will help you find help nearby. United Way, for example, is one of the many partners that 211 can put you in touch with. The Salvation Army is another organization that can help you if you need housing or food assistance.
3. Use your emergency savings
Emergency fund are there for situations exactly like this – so consider using them to help you cope during tough times. While it may sting to see your balance go down, it’s a better alternative to accumulating debt.
When deciding where to use your emergency funds, ask yourself: is the purchase or payment in question really necessary for survival? This can help you limit your spending of emergency funds so that they are only used for the real necessities.
4. Consider a Coronavirus Hardship Loan
Loans for difficulties related to the coronavirus, a type of personal loan, were created in response by banks and credit unions to help their communities. Unlike regular personal loans, these loans are designed as short-term relief: they offer better terms, but they also offer smaller loan amounts that need to be repaid sooner. Typically, hardship loans are $ 5,000 or less.
The advantage of taking out this type of personal loan is that the interest rates are lower, they are funded quickly after approval, and you can defer your first payment for up to 90 days.
These types of loans can really help you get short-term relief, but remember that you still have to pay them back or it could add to your debt. Generally, here is what is required to qualify for a hardship loan:
- You will need a credit history that demonstrates positive behavior.
- Usually, you must be a member of the bank or credit union you are applying for the loan from.
- Some banks or credit unions may have deposit or income requirements.
To apply for a hardship loan, contact your bank or credit union to see if the financial institution offers them.
5. Try to negotiate your bills
If you are having trouble paying some or all of your bills, try to negotiate them rather than not paying them completely. You can do it the old-fashioned way by calling your service provider, explaining your situation, and hoping they’ll give you a break. Or there are services, such as Trim and Truebill, which do the negotiation for you.
It probably won’t be a godsend, but it could seriously lower your bills and who doesn’t like to save a few bucks here and there?
6. You can make an early withdrawal from your 401 (k) without penalty, but you should try to avoid it.
If you’ve exhausted your emergency fund and would rather not take out a loan, you may want to consider withdrawing funds from your 401 (k). As a general rule, this is neither advisable nor beneficial as it comes with a 10% early withdrawal penalty if you withdraw before the official retirement age of 59 ½. However, it is currently waived until December 31, 2020 under the CARES Act.
Only qualified persons will be able to benefit from the exemption from this penalty on withdrawals up to $ 100,000.
You will need to meet one of these criteria:
- You have experienced a layoff, time off, or reduced hours as a direct or indirect result of the coronavirus.
- You or someone in your household has been diagnosed with COVID-19.
- You cannot work because you have to take care of your child.
- You had to close your business or cut your hours due to the pandemic.
- You have suffered adverse financial consequences related to COVID-19.
While not having to pay the early withdrawal fee can make this option tempting, it’s important to consider how an early withdrawal might affect your retirement plan in the future.
For example, avoiding the 10% fee might sound like a good deal now, but that doesn’t factor in all of the compound interest that you would miss if you left the funds behind. According to a 2017 study by Mass Mutual, tapping into your retirement savings early could not only delay your retirement, but also reduce your overall savings by up to 14%.