Failure to raise the debt ceiling can lead to delays in social security and child tax breaks: What to do if you need money now

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The federal government will soon be unable to meet its financial obligations unless the legislature increases or suspends the debt ceiling before the beginning of the next fiscal year on October 1st. (iStock)

According to the Treasury Department, the federal government will soon be unable to meet its financial obligations for the first time in history if Congress does not raise or suspend the debt ceiling.

The House of Representatives passed a bill between the party lines on Tuesday to suspend the borrowing limit until 2022, and it is likely to face opposition from Republicans in the Senate.

Senate minority leader Mitch McConnell (R-Ky.) Previously stated that no GOP legislature would support raising the debt ceiling. Democratic leaders, including Senate Majority Leader Chuck Schumer (DN.Y.), were quick to point out that Congress had ordered a two-year debt ceiling suspension under the Trump administration.

Treasury Secretary Janet Yellen, in a letter to House Speaker Nancy Pelosi, California, earlier this month urged Capitol Hill lawmakers to address the debt ceiling “through regular ordinance with broad bipartisan support.”

At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be especially irresponsible to compromise the full faith and creditworthiness of the United States.

– Treasury Secretary Janet Yellen, September 8 letter to Congress

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It is uncertain whether the current legislation will win enough votes in the Senate to deal with the debt crisis. In a comment published by the Wall Street Journal, Yellen warned of “economic disaster” if the federal government hits the debt ceiling before a budget decision.

About 50 million seniors may temporarily be banned from receiving social security checks as of October, and child tax credits could also be delayed, Yellen said. Federal employees, including military personnel, can remain unpaid.

If you are among the millions of Americans who would be hit by an impending government shutdown, now is a good time to start preparing your finances. Consider a few options for extra cash, including taking out a personal loan or refinancing your existing loans.

Credible’s online marketplace allows you to compare a wide variety of financial products so you can be sure of getting the lowest interest rate for your situation.

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Even if your federal paycheck is suspended or your child tax credit is delayed, you will still have to meet your financial obligations like housing benefits and other bills. Missing the due date for your debt can affect your creditworthiness and result in costly late fees. Consider these loan options if you need cash right now.

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Unlock home equity by refinancing your mortgage

With property values ​​at record highs and mortgage rates below 3%, homeowners can cash out their home equity at historically low rates Interest rate with mortgage refinancing.

With a cash-out mortgage refinancing, you take out a major home loan to repay your current mortgage. You can access the difference in cash to pay off debts, balance your budget, or use whatever you want.

For example, if you owe $ 200,000 on your mortgage, but If your home is valued at $ 400,000, you can consider a new $ 250,000 home loan to access $ 50,000 in cash.

Remember that mortgage loan refinancing has disbursements associated with closing costs, which are typically around 1.5% of the loan amount. Also, refinancing to a new, larger mortgage costs more interest payments over the life of the loan. However, if you qualify for a much lower mortgage rate, it can make up for the total cost of the refinancing.

Use Credible’s mortgage payment calculator to estimate your new monthly home payment and decide if this is a smart move for you. You can also pre-qualify to see mortgage refinancing rates from multiple lenders without affecting your creditworthiness.

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Take out a private lump-sum loan

While you may be tempted to write emergency expenses on a credit card, it can be easy to get caught up in a cycle of high-yield revolving debt. As an alternative, consider taking out a personal loan.

Personal loans offer quick, lump-sum financing that you pay back over a set period of months. The interest rates are fixed, so you know exactly how much debt you owe and your monthly payments will stay the same.

Plus, personal loan rates are typically lower than credit cards. The average interest rate on a two-year personal loan for the second quarter of 2021 was 9.58%, according to the Federal Reserve, compared to 16.30% for credit card accounts with interest-bearing interest.

Personal loan interest rates vary widely from lender to lender, depending on the length and amount of the loan, as well as the borrower’s credit history. This is why it is important to shop around with multiple lenders to get the lowest possible interest rate for your situation.

On Credible, you can compare personal lender interest rates in minutes.

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Lower your student loan payments with refinancing

Federal student loan payments are currently subject to administrative toleration, but that protection does not extend to private student loans. If you’re struggling to make your personal student loan payments, consider refinancing while interest rates are near all-time lows.

Student loan refinancing can help you save money on interest rates, lower your monthly payments, and even get rid of debt faster. Remember, by refinancing your federal student loan into a private loan, you won’t be eligible for federal benefits like COVID-19 deferral and income-based repayment plans.

Use a student loan refinance calculator to see if you can save money on paying your private student loan. If you decide to refinance your student loans, be sure to compare multiple private lenders at the same time on Credible.

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Do you have a finance-related question but don’t know who to contact? Send an email to the credible money expert at [email protected] and your question could be answered by Credible in our Money Expert section.

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