As the extended unemployment benefit expires, the personal debts remain


Americans have a penchant for debt, so it should come as no surprise that Covid-19 is compounding the problem. After all, tens of millions of Americans are currently unemployed and those who return to work may face lower wages or shorter hours.

Interestingly, there is some positive news to report, most notably the fact that credit card balances have fallen since the pandemic broke out. According to the Federal Reserve Bank of New York’s Q1 Household Debt and Credit Report, credit card balances fell “more than expected,” based on normal seasonal patterns.

In particular, the Federal Reserve Bank of New York reported a decline in credit card balances and other household debts of 39 billion US dollars during this period. The number of credit requests within the previous six months was also $ 135 million in the first quarter of 2020, a slight decrease from the previous quarter.

When jobs disappear, debt sticks

Unfortunately, when it comes to the finances of the average American consumer, the news isn’t all rainbows and butterflies. For starters, mortgage balances rose $ 156 billion in the first quarter of the year to a whopping $ 9.71 trillion. Additionally, auto loan balances increased $ 15 billion and student loan balances increased $ 27 billion from the previous quarter.

That being said, the economic impact of the coronavirus is expected to be delayed, largely as it took a few months for the worst effects to become apparent.

Speaking of their latest report in a press release, New York Fed senior vice president Andrew Haughwout said the following:

“We’re seeing a greater than expected decline in credit card balances based on past seasonal patterns, but it’s too early to be sure of the pandemic link. We will continue to closely monitor these developments and the general state of household balance sheets as key data is updated and the economic situation evolves. “

While the latest numbers only cover the first quarter of the year, it’s easy to expect things to get worse before they get better. And the numbers are already beginning to trend in a frightening direction – even before the extended unemployment benefits anchored in the CARES law expire.

A June 2020 report by Fitch Ratings reported that the US CMBS default rate (which measures mortgage defaults of more than 30 days) saw “the strongest monthly increase in three years” in May.

As a result, Fitch Ratings predicts that “the default rate will continue to rise over the next few months as the vast majority of loans that are now 30 days overdue are expected to become 60 days overdue and a higher volume of loans will be carried over to Special Service.”

Some experts say loan default rates are likely to rise in the coming months, as are credit cards and other types of loans. As the Urban Institute notes, 68 million people had debt collections on their credit reports in 2019, “they write.

On the way to delinquency? Here are a few steps you can take

If you are having trouble paying your bills due to the effects of the coronavirus, know that some banks and lenders have programs in place that can help you. For example American Express

a financial assistance program created specifically to help their customers recover from the pandemic.

This program can help you secure lower monthly payments and interest rates, as well as possible relief from future late payment fees. You may also be able to prevent your accounts from becoming overdue or further overdue than they already are. Better still, this program offers payment plans for up to 60 months, which could be enough time to get you back on your feet.

Wells Fargo

is another example of a bank making an effort to offer help, as evidenced by their dedicated Covid-19 resources page. If you have a Wells Fargo mortgage, car loan, credit card, student loan, or other type of loan, Wells Fargo may be able to help you with the short-term payment reminders, protection from fees, and late payments that are reported to your credit reports and more.

Chase, Citi, US Bank, and many others have also launched their own programs of similar assistance. So if you’re struggling to keep up with payments and need some time to get back on track, don’t be afraid to reach out to your bank to explain your situation. Some have posted a list of help they might want to offer, while others promise situation-specific help. In any case, you will not lose anything if you simply call your bank’s Covid-19 hotline to see if you are entitled to relief.

If you’re behind on other types of bills, the U.S. government has some resources on the website. This page provides access to pages that can help you pay your phone bills, get help with medical bills, get prescription medication costs, or apply for Temporary Help for Families in Need (TANF).

Whatever you do, don’t bury your head in the sand and wait for the situation to get worse. It is possible for your lenders to work with you and give you some time to catch up, but you may also need to take matters into your own hands by looking for new strategies to make some money or forcibly increasing your expenses reduce the bare minimum.

Ultimately, Covid-19 was a nightmare in several ways. Lives lost cannot be replaced, and some of the financial consequences of the pandemic could last for decades. If you are, or are about to be, default on your debt, at the very least, comfort yourself that you are not alone.

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