3 Steps for Dealing with Natural Disaster Debt
- Author: Toni O'Hara
- Posted: 2024-06-26
Natural disasters can uproot your family and render you financially unstable. If you move away from your home, you could spend around $200 or more every day on food, accommodation and gas. You could lose your wages for being away from work for so long and could owe a lot in deductibles even if the insurance covers damages.
It won't matter whether you have savings or not since credit card balances can accumulate quickly. Here is how you should respond in case a natural disaster leaves you in significant debt.
1. Get relief aid
Acquiring relief resources could stretch your finances and speed up the recovery process. According to GreenPath's interim financial wellness expert Gladys Coward, it is essential for one to register for help as soon as they can.You can visit disasterAssistance.gov to check whether you are eligible for grants and other forms of aid. You can also acquire low interest loans from the Federal Emergency Management Agency.
2. Look for help from creditors
You should get in touch with your credit companies to take care of any late payments and check whether you qualify for any financial assistance. They might reduce your payments, waiver fees or allow you to defer a loan. Be aware of your current budget before contacting the companies. Although the creditors may offer you some flexibility, it may not last long, and you may have to tell them when you'll be ready to get ahead of all payments.
The feedback you get will depend on the creditor and sometimes even on the representative. While some will agree to work with you, others may not be willing to. But according to communications lead at Money Management International, Thomas Nitzsche, you should be persistent. You shouldn't hesitate to call the creditors again because you are not likely to get what you want the first time.
Ensure you familiarize yourself with the terms. For example, find out what the new end date is and the amount of interest you now owe? Always note down the date you made the call and the name of the representative. Also, ask them to give you the deal in writing. In case you're late on a number of payments, some credit counselors would advise you to attach a statement alongside your credit report to explain that you're only late on your payments because of the occurrence of a natural disaster.
3. Choose a long-term strategy
Acquiring relief resources and getting help from creditors will just allow you some breathing space to adjust to your new financial reality. You will need to find a lasting solution. Add up all your debt whether personal, medical or credit card and consider whether it's possible to offset the debt within five years.
If you can, the following plans can reduce your credit card interest rates significantly allowing you to clear your debt easily within five years.
- Try accelerating you pay off with methods such as the avalanche method, a DIY approach that enables you to pay extra money to pay off your debt starting with debts with the highest interest rate to those with the lowest.
- If you have excellent credit, consolidate your loan through a balance transfer credit card or a personal loan.
- If things get too tight, get in touch with a nonprofit credit counseling agency concerning debt management.
Include your credit in the recovery plan
There are several simple ways you can use to build your credit while setting up your long-term plan. They include:
- Pay down balances: The amount you use in relation to your credit limit will affect your credit score. Fortunately, the credit company reports to the credit bureaus monthly. Your score will improve as you pay off your debt.
- Make on-time payments: A record of any missed payments will remain on your credit report for seven years. Ensure you pay all your bills on time if you can't convince the creditors not to include disaster-related delinquencies in the report since payment history affects your scores significantly.