How to source emergency cash in the time of COVID-19
As the lockdown eases, you need to take stock of your current cash flow. How are you gearing up for a life in the time of COVID-19? Here are some recommendations on how to find extra cash during these difficult times:
- Take advantage of grace periods.
- Seek some financial assistance from the government, if you’re qualified.
- Consider a side-hustle for additional income.
- Borrow wisely.
There is no sugarcoating it: the coronavirus disease 2019 (COVID-19) is putting a dent in many people’s finances. Keeping finances afloat is a challenge for everyone. Here are a few tips to help manage your money.
Creating breathing room
When it comes to managing money during a crisis, there are two considerations: how to minimize spending and how to optimize income.
First, take advantage of grace periods for loan payments that are available. Anticipating the impact of the enhanced community quarantine, the government passed a law called the Bayanihan to Heal as One Act that gives temporary relief–a grace period–from payments.
Payments are now delayed for loans and bills, but an inevitable “bill shock” follows once the grace period ends. Manage and prioritize your bills payment to avoid “bill shock”.
Considering financial assistance from government
Government institutions extend financial assistance to qualified individuals. These are some of the government agencies that offer help:
- Social Security System (SSS)
- Department of Labor and Employment (DOLE)
- Department of Social Welfare and Development (DSWD)
- Department of Finance (DOF)
You can call SSS and the Government Service Insurance System (GSIS) since their members can avail of emergency loans. The Pag-IBIG House Development Mutual Fund (HDMF) also offers loans to people in areas under a declared state of calamity.
But you are only eligible for government assistance if you are an active member. SSS or GSIS can grant you a loan of up to PHP 20,000, while the Pag-IBIG calamity loan can give you up to 80% of your total contributions. The annual interest rates range from 6% to 10% and are payable in two to three years. However getting the loan immediately may prove a challenge.
Also, depending on where you live, some local governments also offer financial assistance to residents. You can check on individual social media groups of local governments for information on financial assistance that is different from the “social amelioration program” offered by the national government.
You may also check the website of the Department of Social Welfare and Development (DSWD) for details on requirements for financial assistance.
Finding other sources of income
Cutting back on spending and receiving financial assistance can only take you so far.
The COVID-19 crisis has posed employment concerns for a lot of people and finding a new source of income has become critical. The opportunities available vary and people might find themselves settling for lower-paying employment in the meantime.
Side hustles can also be an option if you have the time and energy. These days, freelance opportunities are available online. If you have a marketable skill, like writing, graphic design, web design, or programming, you can try to look for potential clients.
You can also sell things you own but do not need. It may not be a stable and continuing source of income, but the extra cash can help you get by.
Once you exhaust these options, then you may have to borrow money. But, you have to answer these questions first:
- How much money can I borrow?
- How soon can I borrow it?
- How much should I pay in interest and fees?
- Any penalties if I miss payment dues?
- How much time do I have to pay it back?
As a general principle, if you can borrow money immediately, you are expected to pay it back within an agreed term with considerable interest.
Remember to calculate your interest rates and evaluate your ability to pay to avoid getting into heavy debt. Also, be careful where and from whom you borrow.
Here are institutions you can consider if you are short on cash.
Banks are institutions that offer many loan products. These are normally in the form of personal loans or salary loans. Banks let you borrow money in high amounts, reaching up to PHP 100,000 or more. Talk to your bank regarding the requirements and be sure to understand the conditions. Check for the best rates if you have accounts in several banks. Note though that not all banks offer personal loans.
What can be said for banks may generally apply for lending companies. The approval processes from these companies are short – some as fast as one hour, and are usually available online with the shortest borrowing period of at least 30 days.
Meanwhile, the amount that can be borrowed can only go up to PHP 20,000. Short-term loans also come with higher interest rates. For example, they can be at 0.5% per day, which translates to paying back an extra 15% of what you borrowed considering a 30-day term.
Credit card companies
Some credit card companies offer an option to convert a portion of your unused credit limit into cash without the need to submit any documentation. For example, Cash2Go of Metrobank credit card gives you the ability to extend your finances with installment payment options of up to 60 months. But be sure to check interest rates and payment terms.
For the majority, pawnshops are the most popular means of getting cash. Pawnshops allow you to borrow money equivalent to the value of an item you exchange as collateral. However, the amount you can borrow is limited by the value of the item. Their loan terms can go for 30 days but can extend to 90 or 120 days. Interest rates can be as low as 3% per month and as high as 10% per month. If you miss enough payments, the pawnshop has the right to sell or put your item in auction.
Some employers offer emergency loans. Ask your employer if this is available and if you can avail of it. The loanable amount, interest rates, and payment terms, however, will vary from company to company. If you’re able to borrow money from your employer, they usually deduct loan payments from your salary, which can affect your cash flow in the future.
Friends and family
Borrowing money from family and friends might be one of the last options you would want to consider. While they are often willing to help, the loan–and any missed payments–can affect your relationship. This goes either way - if you are the borrower or the lender. Nevertheless, there is no shame in asking for financial support on agreed terms.
Note: This article is part of a collection of stories and practical financial tips that are published to help people learn from the experiences of others, and to pick up lessons on personal finance and sound money habits beyond the pandemic.