The federal government will soon be unable to meet its financial obligations for the first time in history unless Congress increases or suspends the debt ceiling, according to the treasury department.
The House of Representatives passed a cross-party bill on Tuesday to suspend the borrowing limit until 2022, and it is likely to face opposition from Republicans in the Senate.
Senatorial Minority Leader Mitch McConnell (R-Ky.) previously indicated that no GOP legislator will support an increase in the debt ceiling. Democratic leaders, including Senate Majority Leader Chuck Schumer (DN.Y.), were quick to point out that Congress instituted a two-year debt ceiling suspension under the Trump administration.
Treasury Secretary Janet Yellen urged lawmakers on Capitol Hill to tackle the debt limit “through a regular ordinance, with broad bipartisan support” in a letter to the President of the Room, Nancy Pelosi (D-Calif.) earlier this month.
It is not certain that the current legislation will get enough votes in the Senate to resolve the debt ceiling crisis. In a editorial published by the Wall Street JournalYellen warned of an “economic catastrophe” if the federal government hit the debt limit before reaching a budget resolution.
About 50 million seniors could temporarily stop receiving Social Security checks as early as October, and child tax credits could also be delayed, Yellen said. Federal employees, including military personnel, may not be paid.
If you are one of the millions of Americans who would be affected by an impending government shutdown, now is a good time to start preparing your finances. Consider a few options for obtaining additional cash, including borrowing a personal loan or refinancing your existing loans.
You can compare a wide variety of financial products in Credible’s online marketplace, so you can be sure to get the lowest interest rate for your situation.
3 moves to consider if you need cash fast
Even if your federal paycheck is suspended or your child tax credit is delayed, you still owe meet your financial obligations like housing payments and other bills. Failure to meet your debt payment due date can hurt your credit score and lead to costly late fees. Consider these borrowing options if you need the cash right now.
Leverage Your Home Equity By Refinancing Your Mortgage
With real estate values ââat record levels and mortgage rates remain below 3%, homeowners may be able to withdraw equity from their home at a historically low interest rate rate with mortgage refinancing.
Mortgage refinancing in cash it’s when you take out a larger home loan to pay off your current mortgage. You can access the cash difference to pay off debt, balance your budget, or use it as you see fit.
For example, if you owe $ 200,000 on your mortgage, but your home is worth $ 400,000, you might consider taking out a new home loan worth $ 250,000 to access $ 50,000 in cash.
Keep in mind that mortgage refinancing with withdrawal comes with closing costs, which are usually around 1.5% of the loan amount. Plus, refinancing a new, larger mortgage will cost you more in interest payments over the life of the loan. But if you qualify for a much lower mortgage rate, it can balance the overall cost of refinancing.
Use Credible’s mortgage payment calculator to estimate your new monthly housing payment and decide if this is a wise choice for you. You can also be pre-qualified to see mortgage refinance rates from multiple lenders without affecting your credit score.
Borrow a lump sum personal loan
While you may be tempted to put emergency spending on a credit card, it can be easy to get trapped in a cycle of spending. high interest rate revolving debt. As an alternative, consider borrowing a personal loan.
Personal loans provide quick lump sum financing that you pay off over a specified period of months. Interest rates are fixed, so you know exactly how much debt you owe and your monthly payments stay the same.
Plus, personal loan rates are generally lower than credit card rates. The average interest rate for a two-year personal loan was 9.58% in the second quarter of 2021, according to the Federal Reserve, compared to 16.30% for interest-rated credit card accounts.
Personal loan interest rates vary widely from lender to lender depending on the length and size of the loan, as well as the borrower’s credit history. For this reason, it is important to shop around with several lenders to get the lowest possible interest rate for your situation.
You can compare rates between personal lenders in minutes on Credible.
Lower Your Student Loan Payments With Refinancing
Federal student loan repayments are currently in administrative abstention, but this same protection does not extend to private student loans. If you’re having trouble making your private student loan payments, consider refinancing while rates are close to their historic lows.
Refinancing a student loan can help you save money on interest, lower your monthly payments and even get out of debt faster. Keep in mind that refinance your federal student loans in a private loan would make you ineligible for federal benefits like COVID-19 deferral and income-based repayment plans, for example.
Use a student loan refinance calculator to see if you can save money on your private student loan payment. If you decide to refinance your student loans, be sure to compare several private lenders immediately on Credible.
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