12 Top tips on managing your finances during COVID-19 crisis

Isola Moses | ConsumerConnect

The issue is between the Coronavirus (CIVID-19) pandemic and your money as regards your personal finances in recent times.

The Coronavirus outbreak means this is going to be an incredibly stressful period, because although this is a health-based emergency, it’s also a financial-based emergency.

The more you can do now to plan ahead will save you time and energy – and importantly, money– when you might not be feeling at your best.

This guide examines at how you can best manage your money, what help is available from your account providers, and what to think about if you might need to borrow money in this period.

There are some things you can do right now, courtesy of moneyadviceservice.org.uk.

First, check out finance guides on Coronavirus with regard to your rights and entitlements to make sure you get everything you’re entitled to.

Such guides give details of what support you might be able to claim now if you’re employed, self-employed, or a gig economy worker.

If it’s possible, you need to put aside some money for if you can’t work to top up any drop in income.

You’ll also need to look at what outgoings you have and work out the best ways to fund them in the short term. You may follow these steps also.

1. Do an emergency budget
If you’re worried about cashflow have a look at what you’re spending and what income you have coming in.

You may need to cut back on as much as possible to get you through the next few weeks. It’s not going to be fun, but you’ll be pleased you did once it’s all over.

You can also use this time to think about longer-term savings, using a Budget Planner tool or look at ways to cut the cost of your household bills, such as switching providers for your gas, electricity or mobile phone contracts.

2. Check your insurance policies
Check whether you have insurance policies that would cover your mortgage payments or replace some of your income.

For example: Payment protection insurance, mortgage payment protection insurance, accident, sickness and unemployment insurance.

These types of insurance are often offered with life insurance policies or mortgages and it’s easy to forget you have cover.

There is usually a minimum time period, which could be several months, before these policies pay out, so you should talk to your insurer to find out more, particularly if you are worried about redundancy.

3. Talk to your creditors if you think you’re going to miss payments
Once you’ve done your budget if you think you’re going to struggle to pay essential bills make sure you talk to the people you owe money to before it becomes a problem.

4. Use your savings
Do you have some savings you can rely on? Don’t assume you can’t get your money if it’s in a fixed term or notice savings account.

Some banks and building societies are now saying you’ll be able to access them with no penalties. Check with your bank or building society if they’re able to help.

5. Help with loans and credit cards
If you’re struggling to repay loans or credit cards because of the Coronavirus outbreak, you can ask for a payment freeze of up to three months or more.

This covers a number of borrowing options including credit cards, personal loans, guarantor loans, and others.

It does not cover ‘buy-now-pay-later’ arrangements and high-cost short-term credit, such as payday loans, or some car finance deals like hire purchase or Personal Contract Purchase (PCP).

6. Ask for a payment deferral
A payment deferral might not be suitable for everybody; so if you can afford your repayments, you should continue to make them.

To request a payment deferral you need to contact your lender.

Unlike the rules for personal loans, credit cards and car finance, for high-cost short-term credit you can only ask for a one-month payment deferral.

This is because of the short-term lengths of these kinds of loan and the higher interest rates charged.

This will not be suitable for everyone. If you’re already struggling to repay the loan, or your financial difficulties are likely to last longer than a month, your lender might look at formal forbearance measures instead of a payment deferral.

If you are accepted for a payment deferral, this will not affect your credit rating during the period of the deferral.

However, you should not stop payments until the deferral is agreed. If you stop payments before this, then it might be treated as a missed payment, incur charges and affect your credit rating.

7. Problems paying your mobile and broadband bills
If you need help you should check your provider’s Web site and contact them straight away to explain the situation.

Many providers do have support in place to help you if your finances have been affected because of Coronavirus.

This might include: changing your bill date, setting up an affordable repayment plan, moving to a different tariff, lowering your spending cap only using your phone when you need to.

If you’re on a mobile phone contract, you might be able to move to a pay as you go tariff, but this might involve paying a fee to end your contract early.

8. If you are worried about debt
Facing a sudden drop in income if you’re already juggling other debts can have a severe impact on your finances and is probably the last thing you need right now.

You may have been managing to make repayments on money you owe but this crisis is going to push you into problem debt.

Although there may be a lot going on in your life that makes it easy to ignore debt, the sooner you get help the sooner you can get back on track.

There is much free, confidential debt advice out there to support you and you don’t have to face the problem alone.

Talking to someone can mean one less problem off your mind.

Use our debt advice locator tool to help you find advice in a way that’s best for you: face-to-face, online or over the phone.

9. In case you need to borrow money
If you don’t have any savings and are facing an emergency cash shortfall, borrowing may feel like your only option.

Try and use borrowing as “a last resort”; and if you need to borrow, make sure you choose the right type of credit or loan for your situation.

Otherwise, you could find yourself paying more than you need to.

10. Shop around and compare deals
While doing this, look at the interest rate and the Annual Percentage Rate (APR); how much you will repay in total and whether you can afford the repayments; any penalties for missed or late payments; the cost per week or month and whether this might vary.

11. Borrowing from family and friends
If you’re able to borrow some money from family or friends who can lend you the extra cash, this could be a cheap way of getting extra money without resorting to Payday lenders or other types of high cost credit.

They are also likely be more flexible about how you pay the money back.

Hopefully this will be a quick and easy short-term arrangement but you might want to read more on guide borrowing money from family and friends.

This is to ensure that there are no arguments further down the line, especially if they get sick and need the money back in a hurry.

12. Personal loans and credit cards
If you’re thinking about getting a new loan or credit card, it’s particularly important now to think about if you can afford the repayments as your circumstances could change quickly because of the Coronavirus outbreak.

Your credit rating affects the cost of your borrowing and it’s important to shop around and do some research on comparison sites.

On borrowing and credit basics, payday loans are also an avenue to cope with a drop in income for a couple of weeks a payday loan could seem like a really quick fix to help you until you’re back at work again.

However, there are a number of traps you could fall into with payday loans if you don’t know what you’re letting yourself in for.

Before you sign up for any payday loan, it is strongly recommend that you read the terms, as regards what you need to know.

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