COVID-19 has decimated many sectors of the U.S. economy, and while we all hope for a speedy recovery, the unfortunate reality is millions of Americans will struggle financially for the foreseeable future.

Stimulus payments, expanded unemployment benefits, government loans, and payment accommodations from lenders all have helped keep many families and businesses afloat so far. But as these programs end, millions will find their budgets stretched to the breaking point.

NerdWallet, the personal finance website, surveyed more than 2,000 U.S. adults during the first week in May to understand how COVID-19 was affecting their finances. The key findings:

• More than two-thirds (69 percent) said their household income was negatively impacted by the pandemic.
• A quarter of those who said they are struggling had taken money out of their emergency savings account, or were considering it.
• A similar 25 percent said they were spending less on non-essentials.

“The pandemic has upended many Americans’ sense of control over their lives,” said Kimberly Palmer, a personal finance expert at NerdWallet. “One way to regain a sense of control is to control what we can. Audit your current spending and see what you can cut back, especially if your routine has changed because of the pandemic.”

More Info: This blogpost from Bankrate.com explains how to negotiate fee waivers when your bank is not offering them.

Dealing with the Cash Crunch

If you’ve lost your job or been furloughed, there’s only one objective right now: Use whatever money you have to pay for the basics—food, shelter, utilities and transportation.

Assuming you’ve already cut back on spending, you need to prioritize the bills you pay to free up as much cash as possible. Your decisions should be based on the consequences of not paying on time.

As Consumer Reports noted in its July issue: “The line between which bills need to be paid right away and which can wait has shifted dramatically.” That is in part due to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes provisions designed to help consumers, and because many companies realize people need assistance during these tough times.

You should also look for ways to delay payments or make reduced payments until you get back on your feet. Help is often available, but you need to ask for it.

More Info: This NerdWallet blogpost explains what to do when you can’t pay your bills.

Bills

If you haven’t contacted your credit card company yet, call and ask for help. If you’ve already received COVID-related relief and it’s about to run out, contact them again and ask for an extension. You should also be able to get accommodations for your utilities and car loan.

Mortgage

The CARES Act provides payment relief for homeowners with federally-backed mortgages: Fannie Mae, Freddie Mac, FHA, VA, and USDA.

If you’re experiencing financial hardship due to the coronavirus outbreak, you have the right to receive forbearance from your loan servicer. You can ask to have your mortgage payments halted––principal and interest––for up to 180 days. If you’re still having trouble paying at the end of that six-month grace period, you can request forbearance for another 180 days.

During the forbearance period, your lender cannot foreclose on your home or send you to collections. Again, this is not automatic; you must contact your loan servicer and request assistance.

Some loan servicers for non-government-backed loans are voluntarily offering forbearance programs. If you can’t make your payments, contact them and ask for help.

More Info: The Consumer Financial Protection Bureau has detailed information on mortgage and rent relief during this national emergency. Consumer Reports explains how to figure out if your mortgage is covered by the CARES Act, and whether forbearance is right for you.

Keep in mind: Forbearance is not forgiveness.

“This is not free money; you will need to make up those missed payments. But it provides some breathing room that should reduce some of the stress and give you time to hopefully get back on your feet,” said Bruce McClary with the National Foundation for Credit Counseling. “That’s why it’s critically important to understand how you will be required to repay the lender at the end of the grace period, as you enter into a forbearance agreement.”

As Bankrate.com explains in this blogpost, there are typically several extended repayment options available. These include:

• Short-term repayment plan: You get six months to make those missed payments (including interest) on top of the regular monthly mortgage payment.  As Bankrate explains: If your total monthly mortgage payment is $1,000 and you postponed payments for five months, you need to pay back $5,000. Once forbearance ended, you would pay that $1,000, plus $833.33 ($5,000 divided by 6 = $833.33) for six months until you were current again.
• Extended loan modification: This option gives you the most breathing room because it takes the money you owe and tacks it on to the end of the loan. So, if you skip payments for five months and have 15 years left on your loan, the new term would be 15 years and five months. This does not change any other part of your loan, only the length.
• Flex modification: If you can no longer afford the mortgage at the current interest rate and/or term, your lender may be willing to modify the loan so you can handle the payments. “The possibilities for this are many, and so are the implications, so tread carefully here and consider seeking professional advice,” Bankrate cautions.

Mortgage forbearance should not appear on your credit report, so it will not hurt your credit score. If you simply stop making payments, that could damage your credit history. But mistakes happen.

So, if you’re granted forbearance, it’s important to make sure the mortgage servicing company is reporting your loan “paid as agreed,” and not “delinquent” during the forbearance period. Check your credit files at the big three credit reporting agencies––Equifax, Experian and TransUnion––by going to AnnualCreditReport.com. You can do that for free, once a week, until April 2021.

Need some advice? Talk to a housing counselor approved by the U.S. Department of Housing and Urban Development (HUD) who can explain what options are available in your state.

You might also want to contact the non-profit Homeownership Preservation Foundation at 888-995-HOPE (4673). The foundation works to prevent foreclosures by helping homeowners get loan modifications.

Student loans

The CARES Act suspended monthly payments on all federal student loans until the end of September. That has been extended by executive order through December 31, 2020. This automatic forbearance suspends interest charges until the end of the year, as well as wage garnishment (or other collection activities) for borrowers in default.

More Info: StudentAid.gov has detailed information on Coronavirus and Forbearance for Students, Borrowers, and Parents.

Many private lenders are willing to allow deferred payments without penalty to those who ask and can prove a hardship.

For some, that month grace period won’t be enough.

More Info: Learn how to apply for temporary relief or lower your federal student loan payments on the Federal Student Aid website.  

Where to Get Emergency Money

When you’re behind on the bills and there’s no money coming in, you need emergency cash. Many of the options are extremely costly; a few make sense because they won’t cause long-term financial harm.

Payday loans

Consumer advocates agree it’s best to skip those costly payday loans. In some states, the annual interest rate (APR) on these loans exceeds 600 percent, according to a survey by the Center for Responsible Lending. And while a payday loan is supposed to be a short-term loan (no more than four weeks), most borrowers can’t pay off the loan when it comes due, so they renew the loan, getting deeper and deeper into debt.

More Info: Consumer Advocates Blast Federal Government for ‘Gutting’ Payday Lending Rules

Cash advance on your credit card

This is another costly option because the interest rate on cash advances is significantly higher than for unpaid balances on purchases. The average cash advance APR is currently about 24.80 percent, according to a survey of 100 popular cards done by CreditCards.com in July. The highest rate was 36 percent.

Other downsides: There is no grace period––the interest starts accruing the day you take out the loan––and almost every card (98 out of 100 in the CreditCards.com survey) charges a cash advance fee. It’s typically $10 or 5 percent of the loan, whichever is higher.

“Even if your situation is dire, it’s important to know that you may have some good options for getting emergency money, and a cash advance is not one of them,” said Ted Rossman, industry analyst at CreditCards.com.

Personal loan

Check with your bank or credit union to see what’s available. Typically, rates are much lower than what you’d pay for a credit card advance. Personal loan interest rates currently range from about 5 percent (for someone with excellent credit) to 36 percent according to the latest update from Bankrate.com.

More Info: Here’s a list, via CNBC, of 10 questions to ask before you take out a personal loan.

Tap your retirement savings

The CARES Act makes it easier to access your retirement savings by expanding the rules for hardship distributions to those affected by the pandemic. You can now withdraw up to $100,000 of your retirement savings without getting hit with the 10 percent early withdrawal penalty. You also have an expanded timeframe for paying the income tax owed on the amount withdrawn.    

If you have a Roth 401(k), tap that first because unlike a traditional 401(k) there are no tax consequences to making a withdrawal.

“Raiding your retirement accounts should only be done when every other option has been exhausted,” advised Greg McBride, chief financial analyst with Bankrate.com. “By doing this you are dealing yourself a permanent setback to your retirement planning.”

More Info: FINRA (the government-authorized non-profit that oversees U.S. brokers-dealers) explains provisions of the CARES Act that deals with Retirement Fund Access and Student Loan Relief.  

Watch Out for Scams

“In stressful times, scammers are everywhere,” cautions an FTC blog post. “Beware of any company that guarantees that creditors will forgive your debts, or makes you pay upfront for help. If you are looking for debt relief, make sure to find help you can trust.”  

Before you do anything, talk to someone who’s on your side––a non-profit credit counselor. They will look at your situation and suggest solutions. The first consultation is typically free; after that you pay on a what-you-can-afford basis. You can find a non-profit counselor near you on the National Foundation for Credit Counseling website. They also have trained counselors who can help with student loan and mortgage payment problems.

“We can’t solve every problem,” NFCC’s McClary said. “Some financial situations are just too serious overcome, but we will give you the best guidance possible.”