Natural disasters can cause an enormous amount of devastation and damage, but the effects can actually be more far-reaching than many imagine. When a natural disaster strikes, debt and/or your personal finances are probably the LAST things on your mind. But these two topics are going to come to light pretty quickly after something bad happens. You’ll have to deal with homeowner’s insurance, your bank, a few other financial institutions, and possibly disaster relief agencies.
While insurance might cover the cost of a destroyed home or other valuables, there can be additional consequences that can wreak havoc with your finances. For many, the long process of recovery can sink them deep into debt that can create long-term problems with their finances.
We just got out of a pretty rough hurricane season, and hundreds of thousands of people are still dealing with the effects of flooding, power outages, property damage, and much more. People are also dealing with the on-going devastating wildfires in California. There are A LOT of people who probably have some financial questions about how to deal with these things.
Here are a few helpful tips to assist you in managing the financial effects of a natural disaster:
1. Explore relief options –
Before you go spending precious cash reserves or putting things you need on a credit card, explore what relief options are available to you. If the natural disaster was citywide or regional, such as in the event of an earthquake, tornado or tropical storm, there may be state or federal relief available.
The Mortgage Bankers’ Association has published a very helpful booklet that provides important information about the Disaster Recovery process for homeowners who have experienced a natural disaster that has destroyed their home. Here’s the link to this free booklet: https://www.advantageccs.org/wp-content/uploads/18233_MBA_Natural_Disaster_Relief_Brochure.pdf
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While government efforts do not always provide the most comfortable or convenient options, they can help preserve what finances you have and mitigate the long-term consequences of overwhelming debt. In addition, however, some of the longer term relief options that are available from the federal government include disaster unemployment assistance, special home loans for disaster victims, and disaster tax relief.
2. Consider raising money –
A number of individuals and organizations have started using GoFundMe or other fundraising platforms to help raise aid in times of crisis. Although some people would rather give directly to an established organization such as the Red Cross, others would prefer to give straight to an individual or family in need. Don’t be too proud to consider reaching out for help. You might be surprised at how much is available or where it comes from. It’s also a good idea to look into other special programs that may offer additional assistance. For example, you may be eligible for some veteran benefits or assistance from FEMA.
3. Negotiate with creditors –
When you are in disaster recovery mode, you need every dime of available cash you have, because it might literally be keeping you alive. Insurance and other forms of reimbursement or relief can sometimes take weeks or months to kick in, and you have to survive in the meantime. This means paying bills generally takes a back seat. Unfortunately, however, failing to pay your bills can result in exorbitant late fees that can end up stacking up and sending your balances skyrocketing over time.
Fortunately, many, if not most, creditors have grown aware of the snowball effect that disaster recovery can have on a person’s finances. Many creditors will now work with disaster victims to temporarily suspend payments, limit finance charges, and in some cases even increase credit lines. Be careful of using this option, however, because eventually, it will have to be paid back. A better course of action is to explore relief options that don’t need to be paid back and use credit as a last resort.
Contact your credit card lenders and mortgage company, and any other creditors you have. If the disaster impacts your ability to make payments on time, your creditors may waive late fees or even allow a deferred payment. Advantage CCS is available to help you communicate with your creditors or lenders and can offer additional financial guidance and support.
4. Contact your insurance companies –
If you haven’t already, contact your insurance companies to file a claim ASAP. Whether it’s auto, home or flood damage, your insurance company will help you take the necessary steps to make a claim. Don’t forget to take photos of the damage! You can use your Smartphone and save the photos. This will help you make an inventory of losses and provide proof of the damages.
5. Check your credit report often –
Go to www.annualcreditreport.com for a free copy of your credit report. If you notice that late payments have affected your score, you can add a short statement to your report explaining your situation. You still may see some impact to your credit report, but it can help with future lenders.
6. Call your utility companies –
If you can’t live in your home due to damage, call your utility companies right away. Utility companies can put a stop to your bills if you are not living in the home or not receiving utility services. It also a good idea to call them asap in case there’s damage to gas lines or other dangerous hazards like that.
7. Speak with a HUD-certified Housing Counselor –
It’s free and the counselor could really help you with your housing issues due to the natural disaster. Advantage CCS is a HUD-certified Housing Counseling agency. Give us a call right away at 1-866-699-2227.
The larger the natural disaster you are struggling with; the more difficult recovery may be. If just your own home burns down, that can be traumatic, but you will still have a local support structure that can help in the recovery. You will also likely still have a job or your business will be unaffected, which means you still have a source of income. If the disaster affected your entire town, community or region, however, your neighbors will all need support of their own, and your business may have burned down as well, leaving you without a job or source of income.
While recovering from a disaster can be a very painful and scary time, you don’t want to sabotage your recovery efforts by sinking yourself deep into debt in the process. There is a ton of help out there if you’re willing to seek it out.
Check out these other amazing and helpful tips from the CFPB: https://www.consumerfinance.gov/about-us/blog/9-financial-problems-after-natural-disasterand-what-you-can-do-about-them/