COVID-19 has caught us all by surprise. Shops closed, lockdowns on every part of the world, and some even lose their jobs.
The magnitude is unimaginable. Just a few months ago, we were celebrating New Year’s Eve, and in an instant, we’ve moved towards a new normal.
Indeed COVID-19 has impacted us all, as a country, as a business and as an individual. With rising unemployment and an economy that’s in a stand still, how would we survive on balancing your needs and paying of your debts? Some suggests to tighten the belt, and wait for things to get better, but there’s no guarantee, and there’s no specific timeline on how things would go back to the way they used to. Some even say that it may take us a year or two to recover.
With this, here are some tips on how to manage your expenses and debts during these trying times.
Help is available. From £317 a month, the standard allowance from Universal Credit has increased to £409 a month.
Who are eligible? You may be able to get Universal Credit if:
- you’re on a low income or out of work
- you’re 18 or over (there are some exceptions if you’re 16 to 17)
- you’re under State Pension age (or your partner is)
- you and your partner have £16,000 or less in savings between you
- you live in the UK
First, here are some don’ts, and actions to avoid for us to keep afloat during this crisis:
- Taking out money from your Pension is a bad idea. Pensions are the hard-earned money that you’ve worked for on your entire professional career, and it would be best to find alternatives avoid quick decisions on using your lifetime savings.
- Avoid declaring for insolvency. Prioritize your debts and rank them based on which is urgent, and which ones are capable of holding.
- Borrowing more may lead to the worse scenarios. Thinks about the long term effect of this. As mentioned before, we’re unsure when will this pandemic end. So, borrowing more during this time can lead you to more debts and can end up defaulting.
Prioritizing what we need
On planning a budget for your household, it would be best to prioritize what you need to cope up for the upcoming months.
Shelter. Especially for those who are renting. The allowance from the Universal Credit could loosen up the cost of rent. Rest assured, the government confirmed that there will be no home evictions happening for the next 3 months.
Utilities. Gas, electricity, and water providers have provided payment breaks amid the COVID-19 pandemic. For prepayments, you can ask to either delay or reduce the deductions for the next months.
Council Tax. You could apply for support, or there are even councils that wipe out your Council Tax. You can visit your local council website for more information.
Insurance. Just like payment for utilities, these payments can be delayed. So, it would be best to settle this with your insurance provider.
Dealing with debts
- Consumer Debts – For loans and credit cards gave a 3-month holiday for consumers.
Heads up: Stopping your payment is not enough for the 3-month holiday to start. You’d have to agree with lender about this to proceed. Also, interest fees are still recurring but this would not affect your credit score. So, one less problem.
- DMP (Debt Management Plans) – DMPs are not loans. It’s more of a program where debt management companies work with lenders on your behalf to lessen your monthly payment and interest rates on your debt and waive or reduce any penalties. Just like consumer debts, you could ask for payment breaks from them or a payment rearrangement.
- IVA (Individual Voluntary Arrangement) – IVAs are like DMPs, except IVAs are legally binding arrangement between you and your creditors, unlike DMPs that are informal. IVAs are currently offering either to lessen your payment by 15% or can give you up to 9 months of payment breaks.
- IPA (Income Payment Agreements) – IPAs are for individuals that declared for bankruptcy. Theses are regular payments taken from their income into the bankruptcy estate for an agree time period to help pay off creditors and also the costs of the bankruptcy process. IPAs cannot be extended, as it’s maximum is 3 years, but you could ask for your OR’s to reduce it, to even zero if that’s possible.
At the end of the day, this will boil down on how you’d manage your payments and your credit. Remember, always prioritize your need, then the payments that has the nearest due date. Soon, things will be back to normal, and we’d all recover.