At this point we have all heard the statistics.
In 2019, roughly 40% of adults said they would have a hard time tying an unexpected $ 400 bill, according to the Federal Reserve. About 12% said they just couldn’t pay for it.
But what about this year? 2020 was more difficult than ever for many Americans. Now what if we are faced with an unexpected car repair, medical bill, or even a pet emergency?
Here are some options that could help you avoid getting deeper into debt.
1. Negotiate a payment plan
If you are struck by an unexpected medical bill or need to write an unexpected expense on your credit card, be sure to call these agencies to see if they can create a repayment plan that suits your current financial needs. You could negotiate things like the option to delay payments or lower your monthly minimums.
This isn’t always guaranteed to work, but it’s worth a try, especially as more companies understand the current circumstances.
2. Escape credit card debt immediately
If you’ve faced unexpected costs and had no choice but to deposit a credit card, it may be worthwhile to refinance or consolidate your debt with a personal loan.
Many credit cards have high interest rates – sometimes north of 20% – which will pay off your balance as if you were financially on the water. If you refinance these with a personal loan, your interest rates could drop much lower.
If you’re not sure where to start, it’ll take you to a website AmOne want to help.
If you owe your credit card company $ 50,000 or less, AmOne compares you to a low-interest loan that can be used to pay back every single one of your balances.
The advantage? You have to pay an invoice every month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you will be out of debt The much faster. Plus: No credit card payments this month.
AmOne will also not make you stand in line or call your bank. And if you’re worried about not qualifying, it’s free check online. It only takes two minutes and can help you pay off your debt years faster.
3. Stick closely to a budget
It’s not easy, but sometimes the most effective way to deal with unexpected expenses or debts is to have a strict budget.
The 50/30/20 method is probably the least intimidating approach.
It’s simple: 50% of your monthly take-away pay goes into essentials (think rent, groceries, minimum debt payments, etc.), 30% goes into your personal expenses (like Netflix and doing your hair), and the last 20% goes to your financial goals.
You may have to play around with the metrics first to find the right balance, especially if there are unexpected costs. However, if you make sure you take the last 20% into account, you can pay off your debt faster.
You can also use this method to build an emergency fund for the next unforeseen expenses.
This article originally appeared on www.thepennyhoarder.com