The amount of debt held by Americans increased by almost 4% in the first quarter of the year, as evidence over how the coronavirus pandemic has affected household finances begins to emerge.
According to the latest Federal Reserve data, households across the U.S. fell 3.9% deeper into the red in the three months to the end of March. However, with the survey only covering the early stages of the COVID-19 outbreak, the fear is that the situation will end up a lot worse for many Americans, pushing rising numbers towards the services of the best debt consolidation companies.
Around 44 million U.S. jobless claims have been made over the last 12 weeks, meaning more than one in four American workers have lost their job since the end of the first quarter, a period not covered by the Federal Reserve research. Broadly in line with the unemployment figures, a new survey by Bankrate.com reports that just over a quarter (26%) of Americans think their personal finances have suffered since COVID-19 struck.
However, given the scale of the economic turmoil that has prevailed, this figure is lower than might have been expected. Indeed, more than half (53%) felt their financial circumstances were about the same as before the pandemic, while 12% actually said their finances had improved.
Managing your finances in uncertain times
Much of this apparent resilience can be credited to federal government and financial providers who have acted decisively to try and help consumers. The rollout of the coronavirus stimulus check will have helped allay some of the immediate financial pain, as will the assistance that has been offered by credit card issuers. Mortgage lenders have also been affording leeway to homeowners struggling to meet their monthly payments.
However, obviously, consumers have had to quickly adapt too, with many altering spending habits in response to new financial constraints and making cutbacks wherever they can. Credit card borrowing has plummeted at the same time, as households look to avoid taking on more debt if they can, while the personal savings rate has soared, and emergency funds are being reinforced.
“Even with the economy in recession, most Americans indicate that their personal finances haven’t been adversely affected since the pandemic began,” says Mark Hamrick, Bankrate senior economic analyst. “Even so, the high degree of prevailing uncertainty dictates the need to focus on saving for an emergency while paying down debt.”
Inevitably, debt will remain the major problem for many, and coping with this burden is vital. In terms of mortgages, interest rates are either at or near record lows, paving the way to save thousands of dollars in monthly payments if you can secure a new deal with one of the best refinance mortgage companies.
For those with high-cost credit card debt, a balance transfer card is one option to try and better manage credit card debt. However, for some, the option offered by debt consolidation companies to bring together debts into what will hopefully be one lower and more manageable payment will be the best course of action to take.