Preparing for a natural disaster can be stressful, but being late on your bills while also dealing with the aftermath can be daunting. Just ask Tami Kurtz.
Kurtz, a real estate agent at Triplemint in New York, had catastrophic damage to her home after Superstorm Sandy in 2012 and found it difficult to manage life outside of recovery.
“Working with the banks, insurance providers, contractors, and [the Federal Emergency Management Agency] is a full-time job,” she said. “In my case, recovery was a full-time job 15 to 18 hours a day for the first four months. I was able to completely gut my home, followed by rebuilding within seven months of the hurricane. I know many people had not rebuilt, nor were back in their homes for two to five years.”
Last year, hurricanes Harvey, Maria, and Irma crushed parts of the Caribbean, Puerto Rico, and the southern U.S., causing weeks (and months) of power loss and damage to millions of residences. It’s not exactly easy to get back to work and stay up to date on bills, especially if you can’t return home because you were displaced.
Falling behind on bills, such as student loans or credit card payments, can hurt your credit. You could end up in default, which can cause your credit score to tank and hurt your chances of getting approved for credit, including a mortgage, in the future.
Be mindful of your finances before a hurricane hits and know what you need to have ready after the storm passes.
How to prepare before a natural disaster hits
Kurtz recommends setting enough money aside to cover your cost of living in case you’re displaced.
“I highly recommend you keep a set amount aside, equal to five to six months’ cost of living at a minimum,” she said. “I drained my savings during this time and found it necessary to withdraw funds from my 401(k) as well. Insurance only covers a portion of rebuilding and nothing for your personal property, such as furniture, clothing, art, or computers.”
Joe Hogan, director of financial planning for Mariaca Wealth Management in Lake Worth, Florida, said you should review all your coverage.
“Consider uploading financial records, legal documents, and medical information to a secure online cloud-based document storage system,” he said. “Contain physical documents and removable external hard drives in fire- and flood-protected safes or safe deposit boxes.”
Hogan also recommends documenting your property. Record video of what your home looks like before a storm hits. Also, if it’s far enough in advance, make sure your savings account is stocked. If you’re out of work, you’ll need to cover a lot more than just bills.
“Establish a liquid emergency fund equal to three to six months of expenses,” he advised. “This will help provide for short-term financial needs during any period of financial uncertainty.”
Getting financial help after a natural disaster
Regardless of what payments you need to make, you might have quite a few to handle after a disaster strikes. Luckily, there are a few ways to cover your bills and debt in the immediate aftermath of a natural disaster.
To avoid falling behind and damaging your credit score, take action right away.
Both federal and private student loans have a few payment assistance options in case of emergencies.
If you’re having trouble making federal student loan payments, you can apply for help through forbearance. Forbearance will pause or reduce your payments for up to 90 days.
Forbearance won’t reduce the amount you owe. Instead, your delayed payments will get incorporated into your original balance. You might be able to pause payments for up to 12 months, depending on your situation. Keep in mind that interest still accrues during forbearance.
If you have private student loans, Hogan said you can usually get similar benefits, but it depends on your loan servicer. You’ll need to contact your servicer to mention your disaster hardship to see if there’s anything for which you can qualify.
If you’re a student still enrolled in school, contact your financial aid office.
Personal loans, auto loans, and credit cards
Many lenders have plans in place to help you manage your payments in the wake of a natural disaster, but it’s not guaranteed, Hogan said. It’s up to each loan provider to determine what should be offered to customers.
“Private lenders often offer forbearance on loans due to natural disasters,” he said. “[You] should consult with the lender prior to a natural disaster to learn about the policy.”
Private lenders aren’t obligated to offer financial assistance, which is why any relief is helpful.
Each lender offers its own type of help, according to Consumer Reports. Some will waive late fees, while others might pause payments for a certain period after a storm has passed. Kurtz’s experience with her credit card company was good at first, but it didn’t stay that way.
“I was able to talk to my credit card companies and defer those payments — in some cases — one, two, and three months without interest or late-fee charges,” Kurtz said. “I will say, the minute I purchased a plane ticket to visit my ailing father, American Express told me they could no longer defer payments if I was going to spend money on air travel. They did not care or didn’t believe that I had an ailing parent to attend to.”
Not all home loans are created or managed equally. If you have an FHA loan, you might qualify for Federal Housing Administration disaster relief from the U.S. Department of Housing and Urban Development.
While it depends on your specific situation, you might be able to get late fees waived if you miss payments. Unfortunately, you’re still responsible for making mortgage payments even if a hurricane destroyed your home.
“When a hurricane strikes, there is a huge financial stress on the victims,” Kurtz said. “In addition to paying for your immediate occupancy, you must keep paying the mortgage on the uninhabitable property. So while you’ve lost everything, you end up paying for two homes — one you can live in, and one you can’t.”
Some private lenders offer relief as well. Fannie Mae, for example, can suspend or reduce payments for up to 12 months.
You might also qualify for a loan modification so that when it’s time to start repaying your mortgage, your monthly payments aren’t too high that you won’t be able to afford them.
Don’t let a natural disaster ruin your credit
You might have a long road to recovery with your home and community, but don’t let your bills keep you down. Prepare ahead of time so that you can concentrate on other things when the storm passes.
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|Lender||APR Range||Loan Amount|
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4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
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All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
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Upgrade Bank Disclosures
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