When a financial emergency hits, prompt and strategic action is necessary to stay on your feet. Utilizing your available credit in an effective way can be a valuable tool during times like these, but you must approach the situation wisely. The following tips listed in this article will help you learn more effective tactics for using your available credit in the face of financial crises. This includes information on hardship payment plans, credit cards, and debt consolidation options.
First, Don’t Panic – Gauge How Serious the Emergency Really Is
Before you apply for new credit or rely on your credit card to handle a large purchase or household expense, take a deep breath and relax. From there, create a comprehensive list to zero in on your largest debt obligations. Then, sort them in descending order to see how much you owe, what days the payments are due, and how long it will take to pay them off.
If you have available credit to use, consider how much you are currently paying off based on the list you just made. Determine whether or not you can handle the new payment that will come your way next month when you get your statement. Remember, the average interest rate on a credit card is around 22%, and using your credit card will increase your credit utilization.
Additionally, consider whether or not this financial emergency can wait until the next pay period, or if you really need to rely on your credit card or an emergency loan to save the day. If you are trying to get an expensive game pre-ordered, that’s less urgent than a trip to the vet for a sick pet.
Using Your Available Credit Wisely
Although this may seem obvious, do your best to use your available credit wisely. Don’t rely on your credit card for everyday purchases and forget to pay it off. Plan for each purchase that you make, no matter how small it is. If you can, set up a budget that includes all your outgoing expenses throughout the month. Find out how often you are using your credit card and incorporate that into your budget when you are determining how to spend your next paycheck.
High credit utilization can lead to a lower credit score, so keep that in mind the next time you swipe your credit card! Additionally, if you are in over your head with credit card debt, you may not be able to handle the situation on your own. Consider credit counseling or a debt consolidation loan to help you get all of your smaller debts into one larger payment that is easier to manage.
Developing Contingency Plans for Credit Use
While a credit card or loan can be a helpful resource during a financial crisis, consider it more like a Band-Aid to the situation and not a full remedy. Instead of relying on your credit card every month, try to establish a high-yield savings account so you can prepare for unexpected expenses. With a fully stocked emergency fund, you can be less dependent on borrowing and promote the development of a financial safety net that is more sustainable for the future.
What to Do When You Can’t Pay Your Credit Card Bill
People who are struggling to pay for even their most basic needs may qualify for temporary relief through hardship payment plans, which allow for amended payment schedules during times of financial strife and may be able to offer you some temporary relief for your current budget. Despite what you may think, it is actually in your best interest to talk to your creditors when you are facing financial issues.
Additionally, it is important to understand the numerous options available to you besides hardship payment plans. Although not every financial institution offers loans that can cater to those experiencing financial issues, some do offer secured loans that can cater to individuals with rockier credit histories. When compared to standard lending products, these loans may have different terms, eligibility requirements, and interest rates.
It’s Credit, Not a Crutch
Utilizing credit only as needed while also seeking out a debt relief program could be the most optimal way to get one back on track financially. Credit strategies for financial emergencies can help you get back on your feet! Life is unpredictable for sure, but knowing that you have options if you are down on your luck can help you get back on track.