Dealing with Financial Hardship

Financial Tips

Dealing with Financial Hardship

Posted by COTO Insurance & Financial Services
1 month ago | August 17, 2020

A recent poll found that nearly one out of every five Americans are experiencing financial
hardship due to the COVID-19 outbreak and subsequent lockdowns. 1 With reported infections
soaring in recent weeks, financial stress could affect even more citizens as various areas of the
country struggle to contain the pandemic.

However, what may happen in the future matters little to those who are experiencing financial
difficulties today. If you’d like guidance on building a sustainable budget or strategies for future
retirement income, we can help. It’s important to delay any unnecessary purchases and save any
financial windfalls you may receive as long as the economic future remains unclear.
The following is a primer on some of the financial issues you may be facing and what to be
aware of as you plan for tomorrow.

Paying Bills
If possible, pause payments on all but essentials, like food, housing and utilities. This means
tracking down expenses you may automatically pay on a monthly basis, such as streaming
services and subscriptions. If you’re stuck at home, carefully consider what you may need to
retain (like Netflix) versus what you do not (gym membership). Also, many utility providers —
including phone, internet, auto lenders and insurance — are willing to work with customers to
extend payment plans. When in doubt, call. It’s better to discuss options than miss payments and
hope for the best. 2

Borrowing

Use what resources you have, but try to avoid ratcheting up debt. Some credit card companies
offer hardship programs designed to help cardholders through difficult times. According to
NerdWallet, 16% of U.S. cardholders applied for hardship assistance in March and April of this
year. These programs include options like reduced minimums, deferred payments and/or reduced
or waived interest payments. Be aware, however, that entering such a program may result in a
negative mark on your credit report. However, this option is better than missing or making late
payments. 3

Consider other options for borrowing money as well, such as tapping your home equity for a line
of credit or refinancing your mortgage. 4

Housing
The federal government has enacted a couple of protections for people who can’t pay their rent
or mortgage. The first prevents lenders and landowners from foreclosure or eviction — a
provision that was recently extended until Aug. 31. 5 The Coronavirus Aid, Relief, and Economic
Security (CARES) Act includes a provision for homeowners with federally backed mortgages.
Homeowners who have experienced financial hardship due to the coronavirus pandemic can
request a forbearance for up to 180 days. Forbearance permits the borrower to suspend or reduce mortgage payments for a limited period of time, but it does not forgive amounts owed. Those
amounts may be tacked onto future payments or extend the life of the loan. 6

Student Loans

The CARES Act also provided a provision to suspend principal and interest payments on federal
student loans until September 30, 2020. Be aware, however, that this provision does not apply to
older Federal Family Educational Loans not owned by the Department of Education, parent and
Perkins loans, and loans issued by state agencies. 7 However, these lenders may be willing to
work with borrowers who call to request an amended payment plan.

Content prepared by Kara Stefan Communications.

1 Fred Backus and Jennifer De Pinto. CBS News. June 4, 2020. “Nearly one in five say coronavirus has caused
financial hardship.” https://www.cbsnews.com/news/coronavirus-pandemic-financial-hardship-cbs-news-poll/.
Accessed June 25, 2020.
2 Yuliya Rzad. Consumer Finance Protection Bureau. April 17, 2020. “Tools to help when you can’t pay your bills.”
https://www.consumerfinance.gov/about-us/blog/tools-to-help-pay-bills/. Accessed June 25, 2020.
3 Erin El Issa. NerdWallet. June 25, 2020. “2020 Consumer Credit Card Report.”
https://www.nerdwallet.com/blog/credit-card-data/consumer-credit-card-trends-study/. Accessed June 25, 220.
4 T. Rowe Price. June 3, 2020. “7 Steps to Take When Facing Financial Hardship.”
https://www.troweprice.com/personal-investing/resources/insights/7-steps-to-take-when-facing-financial-
hardship.html. Accessed June 25, 2020.
5 Renee Rodriguez. Miami Herald. June 17, 2020. “COVID-19 foreclosure ban for homeowners extended through
Aug. 31. But there’s a catch.” https://www.miamiherald.com/news/business/real-estate-news/article243598727.html.
Accessed June 25, 2020.
6 Consumer Finance Protection Bureau. April 24, 2020. “Guide to coronavirus mortgage relief options.”
https://www.consumerfinance.gov/about-us/blog/guide-coronavirus-mortgage-relief-options/. Accessed June 25,
2020.
7 Sheryl Nance-Nash. Newsday. April 27, 2020. “Money Fix: Lenders offering relief on student loans during
pandemic.” https://www.newsday.com/business/coronavirus/coronavirus-student-loans-relief-1.43949927\.
Accessed June 25, 2020.

Neither our firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified
professional about your unique situation.
We are an independent firm helping individuals create retirement strategies using a variety of
insurance products to custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic retirement income strategies and should not be
construed as financial advice.
The information contained in this material is believed to be reliable, but accuracy and completeness
cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please
contact us to request a copy of the desired reference. 

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