Millions Are Considering Loans to Save Their Jobs or Careers Amid Economic Crisis

Written by
Rebecca Smith

Aug 27, 2020

Aug 27, 2020 • by Rebecca Smith

Millions of Americans are considering taking out private loans as they struggle with the effects of the COVID-19 crisis. The pandemic has caused mass job losses across most sectors, which has led to an unemployment rate of 14.7%. This has contributed to a sense of economic uncertainty that hasn’t been felt since the 1930s. 

No Clear Federal Response 

The actions of Congress have barely defeated this uncertainty. Republican Senators such as Ted Cruz (TX) and Rand Paul (KY) are threatening the efforts of their own party with contrarianism by refusing to vote on any bill that exceeds 1 trillion dollars. 

Meanwhile, the Democrats are considering cutting the cost of their HEROES act to 1.5 trillion dollars. This is an attempt to sway the Republicans who previously dismissed the act as a ‘liberal wish list.’ However, talks remain stalled as the excitement of the presidential race takes hold. This leaves both businesses and ordinary people left in the lurch while the Senate point scores.

Job Loss and Uncertainty 

A survey conducted by The Pew Research Centre found that 43% of participants had experienced a job loss within their household. It was also discovered that only 48% of those with a middle income have a rainy day fund that would cover them for three months. These statistics paint a precarious picture of the nature of America’s finances. 

This economic uncertainty is felt no more acutely than amongst the unemployed and low-income workers. Swift and uncoordinated state lockdowns particularly strangle the hospitality and retail industry. 

Small businesses with existing debts find themselves crumbling and disappearing altogether without much-needed help. This translates into millions of people who suddenly have no jobs, with no hope of getting new ones for the foreseeable future. 

This is something that Congress is keen to address. Both houses promise a second stimulus package for Americans with a household income of under $75,000. The trouble is, they agree on little else. There’s also no accountability for the long term. There are only short-term fixes, and shoulder shrugging as America grapples with this unknown crisis. 

The Crisis That Keeps Taking 

Once you recover from COVID-19, the scars of damaging acquired health conditions are likely to remain. It leaves former patients unable to work in most cases. Even young ex-patients in their 20s find themselves wheezing with breathing problems, lost in brain fog, and taming diabetes, amongst other things. This causes another irreplaceable chunk to be taken out of America's workforce.

On April 8th, UN Deputy Secretary-General Amina J. Mohamed declared that 'We are facing a human crisis unlike any we have experienced' and that 'social fabric and cohesion is under threat.' It was a warning to world leaders to unite against an incomprehensible crisis for humanity’s greater good. 

However, four months later, it’s clear that the brunt of the crisis is borne by the American individual rather than the collective government. The bottom line is that Americans need financial help: Financial help for their healthcare costs, financial help to stop their small business from going under, and financial help to stop them from losing everything. 

Generate Debt to Survive 

In the absence of regular government support, Americans have been using their savings, maxing their credit, and looking into private loans to tide them over. In response, credit card companies and private loan providers are suspending their late penalties and even allowing ‘payment holidays’ to customers. 

Eventually, these concessions will come to an end, but it’s unclear when the pandemic itself will. 

Those who have the privilege to do so, look into staking the family home with home equity loans. They also consider borrowing from their 401(k)s while praying that they don’t lose their job. Otherwise, they only have 90 days to pay back that loan. 

It’s no wonder that half of all participants surveyed by SimplyWise Retirement Confidence Index stated that a second stimulus check is very important to their finances. 

Those who are less lucky take their chances with online loan marketplaces and potentially fall victim to payday loans. In the absence of government support, job stability, or family ties, they have no choice but to combat debt with more debt. Their only hope is the good-natured charity of strangers. 

Gradually, this crisis is causing a speculative bubble to form within America's already battered economy. One day the bubble will burst and drown it in a recession that experts speculate will be as devastating as The Great Depression. The only comfort is knowing that we’ll be in the same position as most of the developed world, with the global economy predicted to shrink by 5.2% this year. 

The key to bringing the global economy back on track is by containing the virus. This is what sets America aside from its neighbors. Other world governments have pulled together to face the force of the virus. However, America has made it clear to the individual that they’re alone unless they have private finances. 

Countries such as Canada, have been more aggressive in helping both its people and businesses survive during this pandemic. One such successful program, Canada Emergency Wage Subsidy, provides a subsidy covering 75% of employees’ remuneration, up to a max of $847 per week per employee. 

Those with nothing have no choice but to try and generate something at the consequence of crippling debt. Given that America is no closer to a vaccine nor cohesive containment, it’s impossible to say when its economic fortunes will be reversed.

Final Word 

For now, individuals keep borrowing and hoping that one day they’ll be back on track again. Congress argues over the nuance of debt and withholds vital stimulus for its people. Meanwhile, the private sector speculates and tries to fill in the gaps that the Federal government left to those who qualify. 

The private sector debt is swelling and putting pressure on the fragile economy. Without credible government intervention, it threatens to drag us down further than we ever could have anticipated.