Families Use Child Tax Credit to Pay Off Debt, Census Bureau Says
Expanded Child Tax Credit (CTC) payments have been a lifeline for many American families during the coronavirus pandemic. The vast majority (77%) of beneficiaries used the monthly payment of $ 300 for household expenses and to repay their debts, according to Census Bureau data.
The Build Back Better Act would extend this benefit until 2022 and make credit permanently accessible to low-income families. But while President Joe Biden’s social spending bill persists in Congress, the future of CTC payments is unknown.
Read on to learn more about how Americans are using the child tax credit, and your alternative debt repayment options if the CTC is not extended. You can visit Credible to compare free interest rates on debt consolidation loans without affecting your credit score.
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More households use their child tax credit than save it
The American rescue plan, which was promulgated by President Biden in March 2021, increased the amount of the child tax credit and automatically distributed the credit in monthly installments ranging from $ 250 to $ 300 per eligible child. Millions of American families qualify for the full amount, with income limits of $ 150,000 for married couples and $ 112,500 for single-parent households.
When families started receiving advance payments in July, about two-thirds (68%) of them used the CTC payment to supplement their expenses or pay off their debts, while one-third (32%) were able to save money, according to Census Bureau Household Pulse Survey. Over time, fewer families were able to save the loan – less than one in four recipients (23%) were able to save money, while the vast majority (77%) spent paying the loan. CTC.
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Low-income families are even more dependent on extended credit. Recent research from the Center on Budget and Policy Priorities (CBPP) found that 91% of households with incomes below $ 35,000 depend on CTC payments to cover basic expenses, such as food, shelter and education. CBPP also found that making the expanded CTC permanent would reduce child poverty by more than 40%.
However, the CTC final payment was distributed in December and it will not continue into 2022 unless lawmakers come together to pass the Build Back Better Act. The $ 1.7 trillion spending bill needs the support of all Senate Democrats to pass without Republican backing, but it was stuck past its original Christmas deadline when the Senator Moderate Joe Manchin of West Virginia withdrew his support for the legislation.
If you were relying on the Child Tax Credit to pay off your debts, you may have to look for other methods of debt repayment in the New Year as the future of CTC payments is not. not clear. You can find out more about paying off your debts by contacting a knowledgeable loan officer at Credible.
MILLIONS WILL NOT GET FULL PAYMENT FOR COVID-19 ECONOMIC IMPACT
How to pay off debt without CTC payments
High interest rate debt is a heavy financial burden that can make it difficult for families to pay other necessary expenses like child care, rent, and utilities. If you’re struggling to pay off your debt without the child tax credit, consider a few alternative debt repayment strategies:
- Non-profit credit counseling. A credit counselor can analyze your finances to help you create a budget through free financial education. They may also sign up for a Debt Management Plan (DMP) to pay off what you owe, and they may be able to negotiate with your creditors to settle the debt for less than what you owe or reduce your debt. interest rate. Some credit counseling agency services can be offered at low cost.
- Debt Consolidation Loans. This is a type of unsecured lump sum personal loan that is used to pay off high interest debts like credit card balances and payday loans. You will pay off your debt in fixed monthly installments over a set period of time, usually a few years. Personal loan interest rates are currently near their all-time low, but the rate you qualify for depends on your credit rating and debt-to-income ratio, among other eligibility requirements.
- Balance transfer cards. Borrowers with very good credit may be eligible to transfer multiple credit card balances to a new card at a lower interest rate. Some credit card issuers have introductory 0% APR offers for creditworthy borrowers who open a credit card with balance transfer. Keep in mind that some issuers charge a balance transfer fee of 3-5% of the total amount transferred. You can compare balance transfer offers on Credible for free.
If you decide to borrow a debt consolidation loan, it is important to compare the offers of several lenders to find the lowest possible rate for your financial situation. You can view the estimated interest rates on your debt consolidation loan free of charge without impacting your credit score on Credible, allowing you to determine if this method of debt repayment is right for you.
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