Financial guidance to help with the impact of coronavirus
The impacts of the coronavirus have had a significant effect on nearly all of our lives. Financially, some people have lost jobs or experienced a sudden drop in income. This guide is intended to help by providing ways to ease the strain on your budget today.
When it comes to your budget
Take advantage of government help
Federal, state and local governments have taken a number of steps to address the financial impact of the coronavirus. For example, the Coronavirus, Aid, Relief, and Economic Support (CARES) Act is a roughly $2 trillion stimulus package that Congress passed in March 2020, is providing Americans with a wide range of assistance, including cash payments, expanded unemployment benefits and relief from certain loan payments. When it comes to that relief, there are four key areas to consider:
Student loans
Anyone with federal student loans, including Direct Loans, FFEL Program Loans and Perkins Loans, can suspend payments from March 13, 2020 until Sept. 30, 2020, and no interest will accrue during this time. This applies whether or not the loans were current as of March 13th. While these provisions don’t apply to private student loans, many lenders are offering payment deferment programs. In any case, check with your loan servicer to explore your options. Learn more with this Department of Education guide.
Mortgages
If you have a federally backed mortgage loan—about two-thirds of home mortgages fall into that category—you may qualify to be able to suspend your payments. Contact your mortgage service provider for details. You can download a guide to the new rules from the Federal Housing Finance Agency here. If your mortgage isn’t covered, contact your lender. Some banks have communicated that they’ll let you defer mortgage payments for certain periods of time and not report missed payments to the credit agencies. Deferment periods vary by lender, so make sure to contact your mortgage service provider to confirm their policy.
Income taxes
The deadline to file your 2019 federal income tax return and pay any taxes you owe without incurring penalties or interest has been extended to July 15, 2020. (Most states have also extended filing deadlines; check to make sure yours is one of them.)
Unemployment insurance
The CARES Act expands the types of workers eligible for unemployment benefits to include the self-employed. Weekly benefits may also be increased to help make up for income that’s been lost due to the impact of the coronavirus.
Reach out to creditors
Check with your creditors to see if they have announced relief policies—many have—or, if not, what accommodations they may be able to make if you have been impacted by the coronavirus. Here are the kinds of programs that are currently available:
Cable and phone companies
More than 100 cable, wireless and phone companies have signed on to the Federal Communications Commission’s “Keep Americans Connected” pledge to waive late fees for customers affected by the impacts of the coronavirus and not cut off service if a customer is unable to pay. You can see if your provider has signed on here.
Utility companies
Policies vary around the country, but many major gas and electric companies have temporarily agreed not to turn off service to customers unable to pay as well as waiving late fees due to the impacts of the coronavirus.
Credit card issuers
Many major lenders are supporting customers in need by waiving late fees and offering deferred payment plans. Typically, deferred or suspended loan payments can show up on your credit report, but some banks are offering to suspend reporting standards to help ensure your credit doesn't suffer due to impacts of the coronavirus.
Auto lenders
Many banks and financing companies are making payment assistance available for auto loans.
Landlords
If you’re struggling to make rent payments, contact your landlord directly. The new federal stimulus law offers some protections from evictions if the mortgage is federally backed and the property owner accepts any type of forbearance. Many cities and states have halted evictions due to impacts of the coronavirus.
Explore options for emergency cash
First, review your monthly budget to assess your needs. In this current environment, if you’re able to stay home, you may already be saving on certain expenses, including gas, meals out and entertainment. Tip: Look over your credit card statements for recurring charges for services and memberships. Stop payments to any you won’t be using, such as gyms, clubs or after-school activities.
Still, if you find yourself short on the cash you need to cover day-to-day expenses, consider the following borrowing options:
Personal loans
You’ll need good credit to qualify for a personal loan, but if you do, rates can be lower than what you’ll pay on a credit card.
Credit cards
If you’re in good standing contact your credit card issuer or go online to see if you can bump up your credit limit, which may let you charge more or take a bigger cash advance as an emergency measure. Just remember, you will pay interest on these balances and cash advances do not receive a grace period.
Your home
If you own a home, you may have built up equity that you can tap into using a home-equity line of credit (HELOC).
Life insurance
If you have a permanent life insurance policy, you typically can access a portion of its cash value through a withdrawal or policy loan.
Retirement accounts
While your retirement account may be a tempting source for cash, especially now that the new CARES Act allows anyone who has been financially impacted by the coronavirus to withdraw as much as $100,000 from a workplace plan, 401(k) or IRA without the additional taxes for premature distributions if you are under 59 1/2. With a Roth IRA, you can withdraw your contributions tax- and penalty free, but with the new legislation this exemption also extends to your earnings. Just remember that any withdrawals you take are still subject to taxes, though payments can be spread out over three years and if the money is repaid in that period you may be able to get some or all of the taxes returned. If you’re in an emergency situation, carefully weigh the choice of taking money out of your retirement account versus other options.
Similarly, given the recent stock market volatility and tight budgets, you may be tempted to pull back on retirement contributions to your employer sponsored plan or to pull investments out of the market. But by investing regularly through automatic payroll contributions, you’re buying at a lower price when stocks have gone down. If you can, continue contributing enough to earn your employer’s full match.
Remember, every loan carries risk—make sure you understand those risks before making a decision.
Learn more about these options for borrowing here: “Emergency Cash: What Are Your Options.”
Learn more about all the help Bank of America is offering its customers at the Client Assistance Program website.
Your longer term opportunities
If you still have a steady income, consider putting any money you’re able to save toward future emergencies. See 6 Simple Steps to Jump-start Your Emergency Fund for tips on how to do this. Plus, you can take these three steps to help protect yourself down the road:
1. Be prepared for future big expenses
Even if you don’t need access to cash right away, considering a home equity line of credit (HELOC) may be a way to secure assets now if you need them in the near future for repairs and upgrades, unexpected medical bills or education expenses down the road. With this credit line available, you may be less tempted to tap into your 401(k) or IRA for a big-ticket item.
2. Check your insurance coverage
Now’s also the time to make sure you have adequate life, disability and homeowner’s insurance. If you have an eligible high-deductible health insurance plan, consider funding a health savings account (HSA). You won’t owe taxes on the money you contribute, and the withdrawals you make to pay for qualified healthcare expenses are tax-free too.
3. Lower your borrowing costs
You can take some steps now to reduce your monthly loan payments and free up money in your budget:
• With mortgage rates especially low, consider refinancing your loan. Look at how long it will take for lower monthly mortgage payments to make up for closing costs. As a general rule of thumb, refinancing may make sense if you can cut your interest rate by at least 1 percent.
• If you’re paying down a credit card balance, think about switching to a card with a lower interest rate. With a history of on-time payments and good credit you may be able to qualify for a low-rate or even zero-percent balance transfer offer.
One or more of these tips and ideas could be appropriate ways for you to proactively manage your finances. Preemptive planning, reaching out to companies and creditors and knowing how you can access some of the options in government relief packages could make a big difference.
For more useful information, visit the Bank of America Coronavirus Resource Center.
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