SafeAmerica Credit Union

managing debt

• By Kevin Alvarez

Managing Debt as Interest Rates Rise

Debt can be a challenge to manage, even in the best of times. Now, with the economy in the news nearly every day, how do you effectively manage your debt as the cost of borrowing for things like homes, cars,
and credit cards rises? People are successful when they set a realistic budget for spending. Focusing on non-traditional gifts, the joy of experiences and the resulting memories, can be just as rewarding without damaging your finances, especially as prices on essentials are rising.

Here are five general questions to ask in order to minimize the hit to your wallet in the face of rising interest rates.

What's Your Current Credit Score And History?

Knowing this information helps you understand how rising interest rates will apply to you. Some research shows that only 33 percent of Americans checked their credit score in the past year. Regularly monitoring your credit can alert you to errors, protect you from fraud, and provide you valuable information to strengthen your credit score–which can potentially minimize the rising cost of borrowing.

What Is Your Debt Portfolio?

Another helpful course of action is to make a list of your current debt such as credit cards, car loans, student loans and other debt. Although it’s a simple step, this can make a big difference in visualizing the big picture of your financial situation. Part of seeing the impact of rising interest rates is understanding exactly where you stand.

What Are Your Current Interest Rates?

An effective next step is to regularly review your balances, terms, and interest rates on a monthly basis. By staying on top of this vital information, you can make adjustments and informed decisions about reducing any existing balances more aggressively. As a debt paydown strategy, it often makes sense to start with the highest interest credit cards or loans.

What Is A Realistic Payment Plan?

As you are able, consider paying credit card balances in full by the due date each month. You can avoid interest charges on what you purchase, which means rising interest rates may not have much of an effect on your household finances.

What Is Your Overall Financial Plan?

To stay financially healthy and minimize the impact of rising interest rates, it is key to earn more than you spend, so that you have enough money to build savings for the future. Keeping an eye on your spending is an important step in the effort to create a budget without the cost of high-interest debt. Once you develop a household budget and track income and spending, it becomes clear where the money is going and where you need to adjust your spending to achieve your financial goals. By setting financial goals, preparing a financial plan, sticking to a budget, and setting up an emergency fund for the unexpected, you ensure that your financial well-being does not suffer as interest rates rise.

This information brought to you by GreenPath Financial Wellness.

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• By Lisa

Managing Debt in the Time of COVID

Information brought to you by our partner, GreenPath Financial Wellness

In the early weeks of the pandemic, understanding the economic impact of the crisis was on the minds of most of us. A specific concern was managing debt in the time of COVID.

The roll-out of forbearance programs as part of the CARES Act gave relief to millions of households and gave Congress time to bolster unemployment benefits and offer emergency aid to businesses.

For those managing debt in the time of COVID, it was helpful to work with creditors to temporarily pause payments toward credit cards, mortgages, auto loans, federal and private student loans and other monthly payments.

These options provided relief and stability to many people during an uncertain time.

Fast forward several months, and many of these forbearance programs are nearing their expiration dates. Lenders are now set to decide whether to continue letting people delay paying off debt including credit cards balances, personal loans and car payments.

LEARN MORE ABOUT DEBT MANAGEMENT PLANS

If you are having trouble paying off your credit card debt and/or other debt, a debt management plan may be a good option.

Learn how they work >>

As the pandemic crisis continues, having a clear set of options can help us feel a sense of confidence when looking at family finances. Here are some ideas to move forward as deferrals and forbearance periods are set to expire:

1. Review the Programs

There’s a lot to know about the ins and outs of deferrals, and student loan deferment and forbearance.

For people who participated in credit card deferrals, contacting your lenders to obtain a review of the terms of the deferrals is helpful.

The information is a good reminder as to the terms of the repayment options and deferral time period.

For those who delayed monthly mortgage payments as part of the CARES act, it can be helpful to review the terms of the original programs.

The Conference of State Bank Supervisors provides an in–depth guide entitled the “Consumer Relief Guide – Your Rights to Mortgage Payment Forbearance and Foreclosure Protection Under the Federal CARES Act.”

The idea is to connect with information so you can make strong decisions about your future.

2. Stay Current

To help manage the uncertainty, it is also helpful to stay current with information related to any changes in forbearance and deferral expiration dates.

At this writing, the temporary delay in paying off personal debt is set to expire around the end of July for some creditors. A few big lenders are extending deferments by several months.

There could be changes to the timing, so staying current with the latest news and information is a good option for people who will need to start making payments again.

When managing debt in the time of COVID-19, Consumer Financial Protection Bureau is a good source of trusted information and publishes recent updates.

3. Team with Caring Counselors

As the temporary pause in payments sets to expire, it is a good opportunity to understand options, and take a closer look at not only any loans on pause but also your entire financial picture.

GreenPath’s NFCC-certified counselors help you begin a conversation about where you are today, and what you need to keep in mind when managing expiration of deferrals and forbearance.

For many, it’s a smart way to pay off your debt. Caring, compassionate counselors guide you through a process to assess your financial situation, understand your goals, and create an action plan to work toward them.

You might have questions as to what’s ahead. We listen with respect, offer advice and information, and suggest options that could help you meet your needs.  Request a call with a financial expert >>

As a SafeAmerica Credit Union member, you have access to GreenPath Financial Wellness; a free financial counseling and education resource.  We encourage you to take advantage of all they have to offer.

Learn More about GreenPath
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