Alternative to Loans: How To Get Financial Help During COVID-19
No matter what your employment situation is currently, it’s more than likely that COVID-19 has had an impact on that. And, perhaps more importantly, your finances.
Maybe you’ve found yourself furloughed and earning only 80% of what you were earning previously.
Perhaps you’re self employed and waiting to find out if you’re eligible for the income support scheme set up by the government in the wake of coronavirus.
If you’re sick, you may need to take time off work and will need to rely on statutory sick pay to keep your bills paid.
If you work in the gig-economy and have found yourself without any new work, you’ll likely have to rely on Universal Credit for support.
Regardless of your situation, COVID-19 is an incredibly stressful time. And you will probably have to make some tough financial decisions.
We know that taking on more debt needs to be highly considered, especially during this turbulent time. So, how can you get financial support during COVID-19 lockdown? And how do you decide what’s the best option for you?
What Financial Support Is Available During The Coronavirus Pandemic?
If you are ill with coronavirus and cannot work due to self-isolation, you will be entitled to statutory sick pay (SSP) from your employer. This is even applied retrospectively from the 13th March. If you are self employed or work in the gig-economy you will need to check your eligibility for Statutory Sick Pay.
If you do not have access to SSP and cannot work then you can apply for Universal Credit. Universal Credit supports you if you are on a low income or out of work. It’s a monthly payment that is calculated to help support your living costs.
Due to the current COVID-19 lockdown you no longer have to go into the Job Centre to apply for Universal Credit as the process has moved online. If you cannot make the application digitally, they are also taking applications over the phone.
Self Employed Universal Credit:
In the current situation, if you are a gainfully self-employed, your business assets will not be taken into account when you apply for Universal Credit.
If you are up to date with your mortgage payments you can apply through the government for a mortgage holiday - which means your payments will be deferred for up to three months.
You will still have to pay the full amount of the mortgage and you will pay more interest due to the extension of time taken to pay it off. However if you’ve been furloughed or have found yourself without work, taking a mortgage holiday could temporarily save your finances.
You have to apply for a mortgage holiday directly through your provider.
Although this isn’t an official or government-backed scheme, you should speak with your landlord to negotiate a rent holiday or a little flexibility in your payment plan.
They don’t have to agree to any changes, but if you’re struggling to pay rent on time then it’s worth letting them know up front and when they can expect that payment to be met.
If you can no longer make payments on your debts, you should talk to your loan or credit card providers to come up with an alternative payment plan.
Some of the high-street lenders are offering a three-month loan repayment holiday, much like the mortgage holiday. But other, smaller lenders will need you to contact them and discuss any changes to your repayments.
Family and Friends:
In an already stressful financial crisis it is important to exhaust all options before taking on more debt. If it is a necessity for you to take out a loan or borrow money asking friends and family to help could offer an interest-free or low-interest alternative.
We’re fully appreciative that not everyone can rely on the points we’ve laid out above. As helpful as these initiatives are they’re not a one-size-fits-all solution.
If you’re unable to access the coronavirus grants and schemes available, but have additional or unexpected expenses that you need to pay for then borrowing credit may be your only option.
Here’s what you need to look out for when borrowing money during coronavirus
Taking Out a Loan
If you have exhausted your options and it is necessary to take out a loan to cover your expenses then make sure you’re comparing interest rates, fees and any penalties around early-repayments.
Try to borrow as little as possible and make a plan to pay more than the minimum required amount to lessen the interest accrued over time.
Opening or Extending Your Overdraft
Due to coronavirus, many lenders are offering interest-free overdrafts to those who are struggling to keep their finances afloat. If you already have an overdraft you should talk to your current provider about an extension or lowering the interest rates in accordance with government guidelines.
If you do take out an overdraft, make sure that you make repayments and reduce the overall amount one you start receiving income.
Like loans and overdrafts, if you already have a credit card you can apply for a three month repayment break to help ease cash flow during COVID-19.
However, if you’ve got good credit and know you can comfortably pay off your credit card once you’ve returned to work or have picked up a new contract, then taking an interest-free credit card could be a quick solution to a one-off payment.
You need to make sure that you will be able to make the repayment in the allotted time otherwise you will end up paying high-interest rates in the long term.
Financial Support During Coronavirus: Key Takeaways
- Everyone's employment and financial situation is different so there are a number of schemes and grants designed to help ease financial stress during COVID-19.
- Through the government you can apply for Universal Credit and check your eligibility for Statutory Sick Pay if you’re self-employed or on a zero-hours contract.
- You should talk to your financial providers about mortgage holidays and freezing repayments for loans, credit cards and overdrafts. This could defer those payments for up to three months.
- If you need to borrow money during the coronavirus lockdown, make sure you’ve exhausted all options before taking on new debt, including talking to family and friends.
- If you choose to take a loan, avoid high-interest short-term loans in favour of low-interest loans with no penalties for early repayments. Always compare interest rates and have a repayment plan in mind that goes beyond making minimum payments.