(The Center Square) – As unemployment claims in Illinois reach historic numbers during the COVID-19 outbreak, some households are working to manage debts.
More than 600,000 Illinoisans have filed for unemployment since early March. That’s about 5 times more unemployment claims than during the first 6 weeks of the Great Recession.
Nathan Grant, senior credit industry analyst with the website Credit Card Insider, said the first step for those in debt should be to reach out to lenders, credit cards and banks.
“Most lenders have relief efforts in place already and many will defer payments or waive late fees, but the relief programs can vary quite a bit by the issuer,” he said.
Grant said it would be financially smart to use some of the money people aren’t spending at bars and restaurants to pay down high-interest loans.
“It is kind of like the avalanche method of debt repayment is where you pay the high-interest loans and the minimums on the rest,” Grant said. “Then when you pay off the highest interest, then you apply it to the next highest interest debt.”
Grant suggested using any federal stimulus money for the same purpose.
Credit card cash advances and payday loans are two options Grant said people should avoid because of high fees and “absurd” terms of agreement, which may help in the short term, but often lead to more debt.