Take out a new credit card or personal loan in a crisis
Consider these factors before borrowing money, especially if you don’t have a job.
In April 2020, about 23 million Americans, or 14.7.5% of the workforce, claimed unemployment benefits as a result of COVID-19.
Although some people use their emergency funds to cover their expenses during this pandemic, it is not an option for everyone, especially now. According to a poll by Marketplace nonprofit, more than 40% of Americans polled said they would be hard-pressed to cope with a $250 emergency effort.
If your sources of income and your bank accounts are exhausted, if you don’t have a savings account to use and you can’t go anywhere, taking out a new credit card or personal loan seems like an easy solution. However, such a decision can have a negative impact on your financial situation and the effects, such as lower creditworthiness or high-interest payments, can last much longer than your financial emergency. Before you decide to sign up for a new credit card or loan during this period, there are a few factors to consider.
Find out why you need the money
Before you apply for a credit card or loan, stop figuring out why you need the money. Find out if your need or desire is important enough to take the risk.
You should only apply for a credit card at this time if it helps you reach a specific financial goal. If you are suspended and need to run your finances, so you can make ends meet with a 0% APR or a credit card with balance transfer while avoiding interest. In this case, you can request this type of credit card using other emergency funding methods such as cash advances. be preferable.
Apply for an unemployed loan or credit card
If you were one of the millions of Americans who have recently lost a job, you may be concerned about your eligibility for a loan or credit card. The absence of a source of income can certainly make it difficult to obtain a loan from various financial institutions, as these may require the assurance that you can make your monthly payments on time.
Losing your job means you can’t repay your loan on time,” said Matt Woodley, founder of CreditInformative.com. “Your chances of getting a loan or a new credit card are much lower. Most banks and other lenders are more cautious about lending than ever. “
However, according to Anna Serio, a loan specialist at Finder, some banks may be willing to work with you as long as you have a source of income such as unemployment.
But in some cases, you may not even need it,” she says. “Many banks and credit unions offer serious customers low-interest or low-interest loans with deferred payment for the first 45 or 90 days. If you are self-employed and lose a job due to the coronavirus, you may be eligible for SBA salary protection or a disaster loan. “
Other ways to stay afloat
You might be hesitant to get a type of loan or credit card. Fortunately, there are other options.
Serio says you should talk to your bank and your creditors about the financial assistance programs they offer, so helpful when it’s difficult. You may be able to negotiate short-term loan terms with some lenders and student loan providers until you recover. You should also consider government support or other funding programs that help provide sources of income for workers in certain industries.