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When you have a pile of bills and no paycheck, address the essentials first. That means the roof over your head, medicine, food, heat, electricity and — for those who still must report to jobs despite a government shutdown — getting to work.
What can wait? Almost everything else.
Communicating with creditors is key to surviving a federal government shutdown and recovering afterward. Here's a guide to navigating the process if a furlough for federal workers has hit your household.
How to deal with creditors
Missing one payment on a credit account — such as a credit card, mortgage, auto loan or personal loan — can knock as much as 100 points off your credit score, and it can take years to fully recover. Sometimes there's no way to avoid that, but it's worth asking lenders if they have programs to help you avoid credit score damage.
First, visit each creditor's website or call the customer service center to see if it has programs in place for furloughed government workers.
Second, if a lender doesn’t have a specific furlough program, ask about policies to accommodate short-term disruptions.
Finally, you may have to make strategic choices about which bills to pay. Make use of the social services safety net, too. Call 211 or visit 211.org to connect with local assistance programs.
Here's what to know about specific types of accounts, plus some ways to cope with any income disruption:
If you are able to make your minimum payment, do so, even if it's a bit late. You likely will be charged a late fee, but if you make the minimum within 30 days of the due date, your account won’t be reported as "delinquent" to credit bureaus. A delinquent payment damages your credit score — and so does making only a partial payment, not the full minimum.
If you can’t make a payment but are in good standing, call your card issuer to explain. Some may extend your due date, waive the late fee and continue to report a "current" payment status to credit bureaus.
If you’re already late on payments, ask if there's a hardship plan that could lower your interest rate or reduce the minimum payment.
How or whether your lender will work with you depends on the lender, your situation and the status of your loan. Make contact before you miss a payment to avoid damaging your credit and risking repossession. The lender may provide options like forbearance or extending your loan term to lower your monthly payment.
Longer term, you may want to look into other options for lowering your car payment such as refinancing your loan.
Payments currently are not required on federal student loans; borrowers haven't been required to make payments since March 2020. That forbearance may end sometime in 2023.
If you have private student loans, make a minimum monthly payment if you can. If not, ask your loan servicer or lender about options to lower or postpone payments. Most private lenders offer postponement, temporary payment reduction or other flexible repayment options for borrowers experiencing economic hardship.
When you postpone payments for any reason, interest will typically continue to grow. If you can, make payments on the interest during this time.
Call your lender before you miss a payment or make a partial one. It may offer a forbearance plan or short-term loan.
If you’re buying a home, a shutdown could delay loan approvals or closing dates, especially if you’re taking out a government-backed loan. If that looks likely, work with your real estate agent or current landlord to seek flexibility on moving dates.
If you’ve covered your essentials and can still make the monthly payment on your personal loan, you should. Otherwise, call your lender to see if your account is eligible for relief.
Some lenders may offer a flexible payment schedule or hardship plan, or waive late fees. Lenders might also forgo reporting missed payments to the credit bureaus.
If a shutdown holds up your U.S. Small Business Administration loan approval, alternatives include non-SBA bank loans, business lines of credit and online loans, although rates are likely to be higher.
You can also apply for small business grants, though bear in mind that government-funded grants might also be unavailable during this time.
Other ways to cope
Find a no- or low-interest loan
Some credit unions and banks have offered no-interest or low-interest loans to furloughed federal workers during previous shutdowns. Check with your financial institution, and be sure you understand the rules on eligibility and repayment terms.
Especially during a time when your next payday is uncertain, resist the convenience of payday loans, which are typically due in two weeks and come with triple-digit interest rates.
Boost your income to dig out
When bills pile up for any reason, taking on a side hustle can help you find breathing room. The gig economy makes it easier to find temporary earning opportunities.