Out of a Job Due to Coronavirus Layoffs and Need Money? Avoid Pay Day Loans

If your employer has a credit union, look to them first if you need a loan, Dean Henderson of Financial Independence Mortgage said

NBC Universal, Inc.

A lot of people already carry some debt financially, and if you are out of work during this pandemic, you just want to be careful not to dig a hole you can’t get out of.

So, if you need cash right now, check with your landlord or your mortgage lender.  Many of them are offering to allow you to defer monthly payments, which can put cash in your pocket right now.

If your employer has a credit union, look to them first if you need a loan, Dean Henderson of Financial Independence Mortgage said.

“Credit unions are going to be the least expensive way to go--some sort of a line of credit,” Henderson said. “Obviously, if you have a mortgage you can get a home equity line of credit, but talk to the credit unions and see if they have options for you to start with.”

If you’re a homeowner, an equity line of credit may make sense, but Henderson says be careful refinancing, as interest rates are reacting to the chaos of the stock market.

“Rates have gone up every day for two weeks, so rates are pretty high right now for mortgages,” Henderson said. “They are not what they were two weeks ago. It may just be a couple of weeks. It may be a month. But we are not in that sweet spot right now where it is a good idea to refi.”

Henderson says stay away from pay day loans period.

While the proximity of these lending institutions are close to home, that’s where their convenience ends, and if you can’t pay back a payday loan in seven days, you could be on the hook for triple-digit interest.

“It’s very expensive,” Henderson said. “What happens is a lot of people will get them and when it comes time to pay it off, they are constantly paying one off and taking another one out. And then they get stuck in the cycle and they never get out of it.”

If you need a loan, you can always compare rates online and at traditional banks.

The interest is often lower than that of your credit card. On the topic of credit cards, if you are making payments on one, now is the time to look for a new card with zero percent interest for at least a year that you can transfer other card balances to. Until state and federal unemployment benefits kick in, every little bit you can save on monthly bills is cash in your pocket.

Henderson also says if you have a 401k account, that’s a great source to borrow from because you are borrowing from yourself. The only person you owe is you, and you have time to pay back that loan. That’s just one more way to get money if you need it right now.

Contact Us