In 2019, it was reported that nearly one-fifth of working adults in the U.S. had no money set aside to cover unexpected expenses. This same report also revealed that 31% of adults have less than $500 set aside for these expenses. The coronavirus pandemic has undoubtedly exacerbated the problem, leaving millions of people unemployed and unable to make ends meet.
If you’re experiencing financial hardship—regardless of whether or not it has been caused by the coronavirus crisis—it’s important to know what to do to improve your situation. Here’s what you need to know:
What Are Examples of Financial Hardship?
A financial hardship occurs when you are no longer capable of paying your monthly bills. Many different factors can cause or contribute to financial hardship, including:
- Suffering a serious injury or illness
- Caring for a loved one who has suffered a serious illness or injury
- Losing your job
- Receiving a pay cut or fewer hours at work
- Divorcing your spouse
- Losing a loved one who you were financially dependent on
- Natural disasters such as hurricanes, floods, wildfires, and tornadoes
These major events could negatively affect your finances and make it impossible for you to cover your monthly expenses.
How Do I Get Out of Financial Hardship?
It may seem like you will never make it to the other side of your financial struggles, but that’s not the case. There are ways to get out of financial hardship, including:
- Review your budget. Now is the time to cut out unnecessary expenses, clip coupons, and take other money-saving measures. Every dollar counts, so save as much as possible.
- Write a financial hardship letter to your creditors. In this letter, explain your current financial situation so your lender understands why you are temporarily unable to make payments. Many lenders are willing to work with customers who proactively reach out for help, so writing this letter will help you initiate the conversation.
- Earn extra income on the side by working as a rideshare driver, delivery driver, remote content writer, or freelance graphic designer. These side gigs can help you earn enough cash to make ends meet until you are able to find a full-time position.
- Cancel monthly subscriptions for streaming services, gym memberships, and apps. You may use these services, but now is not the time to waste money on them. You can always reactivate these subscriptions once you are in a better position financially.
- Applying for a hardship loan. You can take out a loan that can be used to cover your monthly expenses during this challenging time.
How Do I Apply For A Hardship Payment?
If you’re experiencing financial hardship, you may need financial assistance in order to meet your monthly obligations. Fortunately, help is available in the form of a financial hardship loan.
There are many different types of loans that can be used to help you during a period of financial hardship. Personal unsecured loans are always an option. If you take out a personal loan, you will be expected to pay it back with interest within a certain period of time. Many lenders allow you to apply for personal loans online, but you may need to meet with your lender in person to finalize the terms of the loan.
A personal loan is a great option for people with good credit scores. But if your credit score is low, lenders may deny your personal loan application. Instead of agreeing to these terms, consider applying for a title loan.
A title loan is a type of secured loan that allows you to use the title to your vehicle, RV, or motorcycle as collateral. You won’t need to hand over the keys to your car in order to get a title loan. You are still in complete control of the vehicle—the lender will only take ownership of it if you fail to make payments on the loan.
Because you are using collateral to secure the loan, lenders will likely not put as much weight on your credit score when determining your eligibility. This means you may not have much trouble getting approved for a title loan even if your credit score is less-than-perfect. As long as you own a vehicle, RV, or motorcycle, you may be able to get cash quickly by applying for a title loan online.
The documents you will need to apply for a loan will vary from lender-to-lender. But in general, it’s best to start gathering these documents:
- Driver’s license
- Reliable, verifiable source of income
- Title to your vehicle (if you are applying for a title loan)
Talk to your lender to find out what else you will need to submit. By submitting everything at once, you can ensure that your application is reviewed and decided as quickly as possible.
What Happens If I Apply For Financial Hardship Loans?
Applying for a financial hardship loan may help you get the cash you need to make ends meet. You can use the cash from the loan for credit card payments, mortgage payments, utility bills, living expenses, or unexpected medical expenses. Despite this, it’s also important to note that unsecured personal loans or title loans may likely have a high interest rate. Given this information, individuals should consider all of their options before taking out a financial hardship loan.
Taking out a loan may impact your credit score. If you take out a personal loan, for example, the lender will check your credit history, which will put another inquiry on your credit report and may lower your score.
Taking out a loan could also improve your credit score over time. Making consistent, on-time payments on your loan may increase your score and help you build a strong payment history that other lenders will see in the future.
Make it Through This Challenging Time With Financial Hardship Help
Nearly everyone experiences financial hardship at some point in their lives. If you’re struggling financially, it’s hard to stay positive and see the light at the end of the tunnel. Although it won’t be easy, you can make it through this challenging time by following these tips.