Given the scenario of economic recession in Mexico and the world, dependence on credit is increasing. Almost 70% of people who lost a job due to the coronavirus are already taking on more debt than expected with their credit cards; while 60% of those who suffered a cut in labor income use more more credit, according to a survey carried out in the United States by the LendEDU platform.
The same survey warns that 37% of those who keep their work unchanged also depend more on cards. The crisis could drive household debt to its highest point, and two troubling facts are that people lack savings to support themselves, and many hit their credit caps on high-interest cards; even before the coronavirus, says analyst Michael J. Graetz of Columbia University. To know what to do in this scenario, you should follow some of the following recommendations.
Pay attention to your debt with credit plastics.
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According to the Coru.com platform, one of the first things you should do is analyze your financial situation for the next 4 to 6 months and make an urgent plan. Consider that your income will probably be uncertain from April, reorganize your expenses according to the new priorities in crisis, and take into account what debts you have. If you think that the scenario will be very difficult for you to maintain, come to negotiate options with your bank to pay off the most expensive debts.
These are other alternatives that the platform describes and that can help you deal with debt with credit plastics.
1. Access temporary support from banks.
This measure consists of deferring or freezing capital payments for up to 4 or 6 months. It applies as long as the credit is current until February 28, 2020. Each bank establishes particular conditions and deadlines to enroll in its support program, so the client must enter the website of their bank and request via Internet or telephone the benefit to suspend credit card payments.
What to consider?
- The benefit is to stop making the minimum payment and keep the credit history unaffected. There will be no late payment interest for not paying the card during this grace period.
- But the debt continues and does generate ordinary interest. In some cases banks also offer discounts for prompt payment.
- If you agree to this option, keep in mind that, when the temporary benefit ends, you will have to face the debt plus ordinary interests that the contracted plastic has.
2. Transfer or consolidate multiple debts on one card
This is another way to negotiate overdue debts is to refinance or transfer them to a single credit card, through the option of transferring debt from one plastic to another. You must be up to date with your payments and find out with your bank if they offer a product that accepts the transfer of balances or find an alternative that is more beneficial for offering a better interest rate.
What to consider?
- Look for the lowest interest rate or a more comfortable term to pay the debt.
- Ask if there are commissions and costs for the transfer, as well as other penalties, whether for prepayment, non-payment or non-compliance with amounts.
- Ask the minimum and maximum amounts of the transfer and the conditions to maintain the benefit of the preferential rate.
3 Restructure debt
Here it is a matter of negotiating the credit conditions in favor of the client, either in the term or the interest rates. For example, access fixed payments, a longer term to decrease the monthly payment, but with a higher interest rate, or shorten the term with a lower interest rate, even if the monthly payment increases.
What to consider?
- The restructuring can be done directly by the client with the bank or with the support of a debt repairer that guarantees trust and security to the user.
- If the agreements are completed in a timely manner, the credit history is not affected.
- You have to take into account the real priorities, that is, if you prefer comfortable payments at a higher cost or higher payments in exchange for less expensive debt. This payment option must be requested in the first months of borrowing, as it is no longer viable for banks for clients with more than five months of non-payment.
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4. Request a remove
It is an agreement with the bank or financial entity to reduce the total amount of the debt.
The delinquent client seeks an agreement to obtain a discount percentage of the debt. In this case, the default for many months in a row must be seen to demonstrate that there is indeed no way to pay the current debt.
What to consider?
It is the least recommended of the options since it implies negative consequences in the credit bureau, it is recommended to use this resource only when all the options have been exhausted.
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