5 Ways to Borrow Money during the Federal Government Shutdown

29 Sep 2020

The U.S. is currently going through another round of government shutdown.  Though the first one, way back in 1995, was a pain, it did not quite create a panic. Nevertheless, within a few weeks into the federal shutdown this time, it left thousands of federal workers working without pay. As per a recent report from CareerBuilder, over 75 % of the full-time workers are struggling to make ends meet. It’s understandable that, without a regular income for so long, they are neck-deep in debt.

A lot of ways are available to borrow money and bridge this financial gap – but all of these are not without inherent limitations. We will discuss a few of those and you will get to know whether they are good or bad, in relation to the current scenario of the federal shutdown.

Personal Loans

Being unsecured loans, personal loans do not necessarily require a borrower to pledge something of value (for example, a house). But, this can also make the interest rate higher for a personal loan than other types of loan such as the home equity loan.

Also, personal loans have a shorter lock-in period in the range of one year to five years. The payments are deducted automatically from a pre-defined checking amount and this decreases the chance of missing the payment. Personal loans are better suited for loan amounts smaller than a home equity loan. These loans are easier to avail and a number of online facilitators such as Afinoz are there to make these loans more accessible and convenient for the borrowers. 

Federal shutdown assistance programs

Some of the financial institutions in the U.S that address the needs of federal workers ( such as the Pentagon Federal Credit Union, The Navy Federal credit union and the Congressional Federal Credit Union )are providing Furlough Relief Loans so that the affected workers can make both ends meet during this troublesome period.  Most of these loans are available at zero percent interest rate for a short term period. Such loans have come up as tremendous assistance to federal workers who are experiencing an unfortunate interruption in their regular pay.

Some big banks such as the Bank of America, Wells Fargo and Chase are also offering waivers on insufficient funds fee or overdraft fee to workers whose income is disrupted due to the shutdown.

If you are a loan, credit or mortgage customer, you are also eligible to avail forbearance or other pay assistance programs based on your individual circumstances.

Payday Loans

Payday loans are also termed as ‘Cash Advances' and are needed to be paid off in two weeks, in one payment. A finance charge (a combination of the interest and service fees) usually accompanies the final payment. Although these short term loans are easier to get, the interest rate is usually on the higher side. As stated by the Consumer Financial Protection Bureau, a typical $100 payday loan with a $15 payday loan fee is equivalent to an APR of about 400 %!

Home Equity Loans

Home equity was a preferred borrowing option for the American public in the pre-housing-crash and pre-Great-Recession ages when they used to borrow cash from banks by using the assesses value of their homes. But due to the falling housing prices and the stringent lending standards, people have become a bit apprehensive these days for using home equity as a borrowing option.

Nevertheless, lenders are largely offering favorable terms and homeowners are still tapping money from home equity loans at a considerably high level. A home equity loan can be availed as a line of credit, having a variable rate of interest or as a lump sum amount with a fixed rate of interest, having a repayment period ranging from five to fifteen years. Another common way to use the home equity is via a cash-out reference where you choose to refinance your present mortgage and opt for a bigger mortgage.

Credit Card Cash advance

This is one of the most expensive (most common too!) options to borrow money. Moreover, the borrower needs to pay a sum in the range of 3%-5% of the cash advance amount as a transaction fee, in addition to the loan interest. It’s not a feasible option during a time that is as tough as that of a Government shutdown. Making purchases with your credit card is a better option any day.  Alternately, you may consider availing a short term loan from any credit union. You will get such loans at much lower rates too.

The experienced financial experts at Afinoz can guide you on more such aspects of sailing through tough times. To know more, you can contact us at –(Ph no to be given) or at (Email Id )

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“Afinoz”

M/S DS FinWorld Private Limited,

2603, Bishop Ranch, Camino Ramon,

San Ramon, California