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Thanks to the worldwide COVID-19 pandemic, it is hard to predict what our economic future will be. We will recover, of course, but the path is fraught with uncertainty. As such, it may be tempting to take advantage of “free” money and other financial opportunities that seem too good to be true.
Many financial organizations are offering assistance and resources to help their clients make it through these tough times, while others are taking advantage of the situation. So, which are legit, and which are financially devastating? Here are a few money mistakes you’ll want to avoid as the coronavirus rages on.
1. Taking Out Payday Loans
By now, most people know of the shady nature of payday loans. However, the pandemic has created many-a-desperate-situation that forces people to consider payday loans as a solution.
Here’s the harsh truth of the matter: payday loans are never a good idea, no matter your financial strife. There are many alternatives to payday loans that won’t leave you in a worse financial position than where you started.
2. Taking Advantage of Government Payments You Don’t Really Need
During this time, it may be tempting to apply for government payouts you don’t really need as they’ll allow you to pad your bank account “just in case.” Since many of the usual restrictions have been lifted to make it easier for people to get the financial help they need, it’s likely you may qualify for money you otherwise wouldn’t have under normal circumstances.
Eventually, the government will take a closer look at the applications they received for such aid, and it’s possible they could penalize you for taking advantage of these funds when you shouldn’t have. Try to think of the greater community rather than your own personal desires, and only apply for payouts you really need.
3. Not Understanding Deferred Payments
Many lenders are allowing customers to defer payments during this time to make things a little easier financially. Not understanding how deferred payments work can leave you shocked when they finally come due.
Deferred payments don’t go away. The principle gets pushed to a later date and the interest is usually added to the remaining balance, thus increasing what you owe. In some cases, you could be paying interest on top of interest, meaning you’ll be looking at bigger payments once the pandemic is over.
4. Deferring Payments to Invest
Shares are down for many companies on the stock market right now, making it tempting to take advantage of the low prices, even if you don’t really have the funds to do so.
One way some people are freeing up extra cash is by deferring payments on their mortgages or other loans. While this is certainly an option right now, keep in mind that no investment is a sure thing and you could end up losing the money that should have been paying off your loans, making it almost impossible to catch up once the deferment period is over.
5. Cashing Out Your Savings
As the pandemic continues, many people are turning to their savings and/or retirement accounts before exhausting other options to make ends meet. It’s much harder to save than it is to spend, so try making payment arrangements with your creditors, getting a home-based side-hustle, or taking out a small loan to make ends meet first.
The COVID-19 pandemic has created unprecedented financial strife for people all around the world. You can keep your head afloat during this time and protect your financial future by avoiding the mistakes listed above.