Recovery from natural disaster can be a difficult and uncertain process, especially when it comes to your finances. In the aftermath of an event like Hurricane Michael, what if you can’t pay your bills or need money to rebuild? We’ve gathered our best tips to help you manage your money during natural disaster recovery.
Natural disaster recovery: First financial steps
Once you’re in a safe place, here are the first steps to keeping your finances in order:
- Get a handle on your current income and regular expenses. You’ll need to know how much you have coming in and going out, and establish which bills are the highest priority. If you’re no longer living in your home, consider suspending your utilities, cable and internet services to free up money in your budget. If your income is interrupted or you lost your job, federal or state unemployment assistance benefits might be available to you.
- Check your credit report and credit score. Find out where you stand now so you can monitor it as post-disaster updates appear. It’s also helpful to have a handle on your credit profile in case you need to apply for a loan.
- Start the insurance process. Promptly contact your insurance providers to get a copy of your policy and report damage. Experts recommend you take photos or video before moving anything and create an inventory of all lost or damaged items. If you’ve made emergency repairs, keep your receipts. Don’t discard any damaged goods or undertake major repairs until you’ve met with an insurance claims adjuster and agreed on the cost of repairs. The process can take months, so it’s important to maintain accurate records along the way. The Consumer Financial Protection Bureau has more information about working with adjusters and contractors.
- Contact creditors. If your expenses are adding up and you can’t pay all your bills on time, immediately contact each of your creditors. This applies to credit cards, mortgages and other loans or bills. Skipping payments or making late payments can hurt your credit, so be sure to reach out as soon as possible. Many lenders have natural disaster procedures and can work with customers who are impacted by these unanticipated events. You might be able to set up a temporary deferred payment plan or get short-term payment relief.
Natural disaster recovery: Financial assistance from the government or charities
If you need extra financial help during the recovery process, attend local meetings in your area to learn about available programs. You can also check out these resources:
- Federal financial assistance: The quickest way to apply for federal help is online at DisasterAssistance.gov, a hub for more than 70 forms of assistance from 17 federal agencies. Services range from free legal services to loans and grants to repair homes of those who qualify.
- U.S. Small Business Administration (SBA): SBA offers long-term low interest-rate loans to help qualifying small businesses and homeowners recover from disasters.
- Federal Emergency Management Agency (FEMA): FEMA may award certain grants that cover specific needs, like childcare and medical expenses caused by the disaster. FEMA also provides Critical Needs Assistance, a one-time payment for urgent disaster-related needs like food, prescriptions and infant formula.
- American Red Cross: In addition to shelter and food, the Red Cross provides financial assistance to qualified households severely impacted by natural disasters.
Natural disaster recovery: Other ways to borrow money
You can also secure extra funds by borrowing via more traditional channels, such as:
- Online personal installment loan: With an online installment loan, you can borrow a few hundred to several thousand dollars. Applying online makes it fast, and you can usually get the money within a day or two. You’ll pay it back on a fixed schedule over the next few months to few years.
- Auto title/pawn loan: An auto title loan is a type of secured loan uses your car title as collateral. If you own your car outright, you can drive away with cash after an appraisal. The lender keeps your car title until you repay the loan. If you don’t pay it back, you could lose your car. A pawn loan works in a similar way, but with a different object of value (for example, jewelry) put up as collateral.
- Peer-to-peer platform: Websites like Prosper and Lending Club offer short-term loans through their peer-to-peer marketplace. Amounts are typically $1,000 and higher. After your application is approved, the loan is added to the platform. Once it is fully funded by investors, the money shows up in your account. Interest rates can be lower than traditional bank loans.
- Personal loan from bank or credit union: If you need to borrow less than $3,000, a personal loan from a credit union could be an affordable option. Federal credit unions have a cap of 18% annual percentage rate (APR) on most loans (state union rates could be higher), and not all credit unions consider your credit score and income when issuing personal loans. On the other hand, traditional banks generally place heavy emphasis on your credit, and often only offer loans for $2,000 or more.
- 401(k) loan: If you have contributed money to a 401(k) retirement plan, you are generally allowed to borrow up to 50% of the account value, with a maximum of $50,000. Interest on the loan is set by your employer and is put back into the 401(k) account. You typically repay the loan via paycheck deductions over a five-year term. If you don’t repay the loan, you’ll have to pay taxes on the amount and possibly an early withdrawal penalty. Similarly, if you leave the job, the loan must be repaid within a few months or you’ll face taxes. You may also be able to take a hardship withdrawal from the plan under a limited number of circumstances.
- Life insurance loan: Borrowing from the cash value of your life insurance plan has some advantages, including no application or credit check, and no fixed repayment schedule—you repay it on your own time. On the down side, if you don’t repay the loan, the policy’s death benefit is reduced. And because it takes time for the cash value to grow, the amount available to borrow may be small in the first years of your policy.
RISE offers online loans that can help you manage the financial burden of natural disaster recovery. You can borrow on your own terms with our flexible payment scheduling. Apply safely and confidently online today and you could receive $500 to $5,000 in your checking account as soon as tomorrow.