Coronavirus unemployment benefits set to expire soon — what to do when that happens
The coronavirus pandemic has had a significant financial impact on American households, with nearly 40 million unemployment claims filed during the months of April and May. It's estimated the overall unemployment rate is around 13 percent but may eventually approach 20 percent. While the latest jobs report shows the economy added 2.5 million jobs in May, it's possible that high unemployment rates may be sticking around for a while.
"In addition to the obvious changes with interviewing and direct contact, the biggest difficulty in finding work will be the number of jobs available due to changes to our economy," said Rick Myers, founder and president of Integrated Financial Services in Grand Rapids, Michigan.
Some employment sectors may be harder to reenter than others as employers have to integrate social distancing measures and their own financial challenges into the mix. Add in a recession and landing a job may prove even more challenging. If you're receiving unemployment, it's helpful to have a financial contingency plan for when those benefits run out if you don't anticipate going back to work right away.
Consider transferring credit card balances
If you've been using credit cards to help pay the bills or cover expenses while on unemployment, reducing your interest rates can make your debt more manageable.
Balance transfer credit cards can be an easy way to combine balance from different credit cards at low rates and save money. Low credit card rates mean that more of your monthly payment goes toward the principal balance so the debt is paid off faster. Use Credible to compare balance transfer credit cards so you can pay down your debt more effectively.
PROS AND CONS OF BALANCE TRANSFER CREDIT CARDS
Make sure to check the terms of the promotion, including the interest rates and how long you have to pay it off before the promotional rate ends. Also factor in the balance transfer fee, which can add to the amount you have to repay.
Contact your lenders
If you have credit cards, student loans, a mortgage or other debts, it's important to keep your lenders in the loop during financial hardship.
For example, you may need to take out a small personal loan to cover expenses in the short-term until you can get back to work. You can easily compare personal loan rates with Credible to see what kind of interest rates you may qualify for, based on your creditworthiness.
EVERYTHING YOU NEED TO KNOW ABOUT PERSONAL LOANS
Aside from getting a personal loan, you may also want to explore a mortgage refi or a student loan refinance, if you have private loans. It may not seem ideal to take out loans while unemployed but with record interest rates as low as they are, it could be a prime opportunity to save money.
Again, Credible can be a helpful tool for comparing student loan refinance rates. You can easily check student loan refi rates from different banks and lenders in one place to find the best borrowing option for your situation.
Forbearance and deferment periods are another way to manage student loans during coronavirus. Your lenders or loan servicers can tell you which options are available and how to apply for them.
You can save on mortgage costs by taking advantage of low rates with a refinance loan. Take time to compare mortgage refinance rates and don't forget to factor in the closing costs as well.
Look into extended unemployment insurance
In most states, unemployment benefits last for 26 weeks. Extended unemployment insurance allows states to add 13 weeks of benefits on top of regular benefit payments when unemployment rates are high. In response to the COVID-19 pandemic, some states are offering another seven weeks of benefits, for a total of 20 weeks of extended unemployment benefits.
HOW TO REFINANCE YOUR MORTGAGE
That means you could have a longer window to claim unemployment benefits than you anticipated. Just keep in mind that the up to $600 in weekly federal benefits paid under the CARES Act expires July 31. So while you may be able to continue receiving benefits at the state level, you may need to adjust your budget to account for the loss of federal benefits.
Create a budget
You may have created a basic budget to manage your finances during coronavirus but if your income is changing again because unemployment is ending, you might need to revisit it.
Specifically, take a look at what you're currently spending to see how you can get that aligned as closely as possible with what you expect your income to be once unemployment ends. If you've already addressed the obvious budget cuts, such as eliminating takeout food, online shopping and gym memberships, you may need to cast the net a little wider.
For example, you may be able to downgrade your cell phone plan or switch from contract service to a prepaid phone to save money. Raising your car insurance or homeowner's insurance deductibles or bundling policies together could also help add money back into your budget.
WHEN SHOULD YOU REFINANCE YOUR MORTGAGE?
You may also be able to negotiate different payment plans with your utility service providers. For example, switching to a flat-rate billing plan with your electric or water provider could help even out your monthly utility costs so they're more manageable. Or they may allow you to temporarily postpone payments on your account without disconnecting your service if you have a coronavirus-related financial hardship.
Myers said if you've done those things, you may have to look at ways to generate cash flow. Selling things, taking on a side hustle or borrowing from your retirement accounts are just some things you might consider.
Don't panic if unemployment is ending
If you've been relying on unemployment to help you get through a difficult time, it's important to remember that there are financial options for when those benefits end. The more planning you can do before unemployment runs out, the better, Myers said. Staying in touch with your lenders and billers, considering a personal loan to tide you over and comparing refinance rates with Credible can help you map out your next steps once unemployment goes away.