Should I Pay Off My Debt with Stimulus Check?
The 2020 Coronavirus Aid, Relief and Economic Security Act (CARES) is the largest relief package in U.S. history. The CARES Act entitles every eligible American to a $1,200 stimulus check. Millions have already received their payment via direct deposit, while others continue to wait to receive theirs by mail. For many individuals, tough choices of what to do with that money need to be made. Including whether or not to pay off my debt with the stimulus check.
Over 33.5 million Americans have filed for unemployment since mid-March. And more are expected to lose their jobs as the economic toll of the coronavirus continues to worsen. For those who do not have to immediately spend their stimulus check on necessary expenses, the question on what to do with it remains in the air. Given the fact the stimulus check is tax-exempt and entirely free, it could be a good opportunity to pay down some of your outstanding balances. However, there are some reasons why you might consider keeping your regular payments and saving your stimulus check.
What Is Your Job Status?
If you are earning a steady paycheck, using your stimulus money to pay off debt could be helpful. In fact, it may even help you lower interest rates or your required minimum payment. Consider how stable both your employment and financial situation is prior to spending any of your stimulus money.
For example, do you have an emergency fund you can rely on if your hours get cut or you are laid off? Is your job secure enough to make it through the upcoming months of economic recession? Are there upcoming medical, maintenance, or other expenses on the horizon? The coronavirus will impact every industry and every state. But the full extent of that impact will vary for each individual and may not be known for weeks or months to come.
Job security may never be 100-percent certain. But, you should not give your entire stimulus check away toward debt unless you are confident you will not lose your job soon. For those who have been laid off or furloughed, it is better to keep most of the stimulus check and dedicate it for essential living expenses such as housing and food. If you are receiving severance pay, then you may consider taking a portion of your check to put toward debt.
Continued after infographic:
How Much Do You Owe?
If you could pay off your entire debt with the stimulus check, it could help you save hundreds of dollars in interest, especially if you have only been making minimum payments. For those who are worried about staying current with their repayments during the coronavirus, the stimulus check is an opportunity to eliminate small debt entirely and the stress that accompanies it.
If your debt is too much to pay off at once, you should consider consolidation or settlement options to avoid missing a payment. The stimulus check can also be used for rent or mortgage payment or to cover your utilities and grocery bills.
Although paying off debt is always a good thing, you should first consider your budget, savings, future needs, and any changes that are likely to happen over the coming months. When the fear of financial catastrophe is on the horizon, the likelihood of making impulsive decisions could make matters worse. Bankruptcy, canceling credit cards, and missing payments will have serious consequences.
When Not to Pay Off My Debt with Stimulus Check
If you are struggling to stay on top of your debt even with the CARES act stimulus payment, it’s time to speak with an accredited financial expert. The financial professionals at UmbrellaDEBT Relief can help you evaluate what path may help you reach freedom from debt the best and the fastest way possible.
Not all solutions may be in your favor. However, when you work together with a financial professional, you can create a plan to decrease or eliminate your debt. You are not alone. Millions of Americans struggle with burdensome debt. Those who take action will find a brighter future. Contact us today to get started.