Emergencies and misfortune can happen to anyone without warning. Maybe you’ve had a medical hardship that took up all of your emergency cash or you’ve been laid off from your job without warning. It might be that rising costs are outpacing your already tight budget. Whatever the reason, suddenly you realize that you won’t be able to pay all your bills this month.

It can be a scary time, and the feeling of loss of control can be devastating. But there are things you can do to get your finances back in line, from developing a long-term plan to making changes to achieve a lower mortgage payment. From the experts at Solarity, here are five ways to recover if you’re struggling to make ends meet:

1. Planning

This is where you let all the skeletons come out of your closets, put everything on the table and see what you have as far as assets and debts. Then carefully tally up what bills you regularly pay each month, such as for housing, your phone, utilities, your car (including gas and insurance), food, entertainment, streaming services and other loans or expenses. If you have lots of credit card debt, make sure you include that here too.

Once you can see everything, you’ll be able to make a road map so you can get back on top of your financial situation. The important thing here is to see where your money is going every month. If you notice you’ve been spending a lot of money at the movies, for instance, that’s an easy thing you can cut out—and remember, it is only temporary. Instead of going to the theater, you can make your own popcorn at home and enjoy a movie that you check out from the library or stream on a service for which you already pay.

2. What’s essential?

Now that you see all of your monthly expenses, you can divide your debts into two categories: essential and nonessential. Essential payments are those that would have dire consequences if you didn’t pay them: your mortgage, your car, taxes, utilities and other secured loans.

Secured loans are especially important to pay in this difficult time since it’s a loan that is backed by collateral you own, such as your home or car. If you don’t pay that particular loan, the lender can put a lien on that collateral or even sell it to someone else in order to complete the payment on the loan. This could leave you without a home or a vehicle. When planning for essential debts, make sure to leave some room in your budget for food as well.

Nonessential expenses are things you can put off for a while longer because they won’t have such serious consequences. These include informal loans to family or friends or credit card debt. Though, with credit cards, be sure to make on-time minimum payments to avoid late fees, and if at all possible, you’ll want to avoid any additional spending on that credit card while you’re working on digging yourself out.

The essential debts should be paid first every month, with whatever is leftover going to nonessential bills, such as credit cards or other unsecured loans.

3. Consolidate your debts

Debt consolidation is helpful for folks who have a lot of different smaller debts. When you consolidate debt, you typically get a new loan to pay off all your separate balances, which lets you make one payment instead of many. This keeps you organized, and you don’t have to remember different deadlines if they come up at different times of the month. A major advantage is that a consolidated loan can have a much lower monthly payment than paying each of your smaller loans individually, and you may be able to lower your interest rate. 

However, there are some disadvantages you shouldn’t overlook. While your monthly payment may be smaller, the term of the loan may be lengthier. This means you could be in debt for a longer time. And if you happen to default on this consolidated loan, you could lose the collateral if it is a secured loan. This could also drastically affect your credit score, which could, in turn, impact your ability to receive credit or loans in the future.

4. Refinancing could be key

Refinancing your mortgage, auto loan or RV loan for a lower payment could be key to reducing your monthly costs. A lower mortgage payment or vehicle loan payment can make a huge difference. Just about any loan can be refinanced for a lower monthly amount and/or a lower interest rate.

If you decide to refinance for a longer term and a lower payment, once your financial difficulties have passed, you can apply for another refinance to get a shorter term on a higher payment again if you want to try and pay off your loan at a faster rate. Or, if you don’t want to refinance again, you can make additional principal-only payments or simply pay more than the minimum each month to help pay it off faster.

At Solarity, refinancing your home loan is simple and straightforward. Our flexible terms and no-closing-cost options give borrowers peace of mind. Speak with one of our Home Loan Guides if you want to see if a mortgage refinance is a good option for you. We can also help you explore other refinance options such as for your auto or RV.

5. Cash-out refinance option

A cash-out refinance of your mortgage could be a good option too. It’s a way to access your home equity and get a little more money to pay off some other debts. With a cash-out refinance, you get new loan terms for an amount that’s higher than your current mortgage. The difference between your new loan amount and what you owe on the house is where you get “cash out.” Note that the amount of cash you get back depends on how much your home is worth compared to how much you owe.

Solarity offers cash-out options up to 80% of the current value of your home. With a cash-out refinance, the equity you’ve built in your home can work for you and pay off some of those other debts to help get your finances back in order. This type of refinance can help you consolidate higher-interest debt from credit cards, car loans and student loans and potentially lower your monthly mortgage payment.

Realizing you might not be able to make ends meet can be frightening, but you aren’t without options. Contact Solarityto discuss managing your home loan or using it to work for you through a refinance. We strive to help homeowners be successful on each step of their financial journey.

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