24 Apr Debt, banks and government measures during Covid-19
Economies have stagnated as governments around the world implemented strict measures, including social distancing and work stoppages, to halt the spread of the contagion. Mounting debt and unemployment are exacerbating the threats to Canada’s economy and financial system, as the reduction of income is particularly alarming for those with credit card debt and mortgage payments.
Continuing our series of blog posts on debt management, we’ll address what banks are saying when it comes to credit card debt and possible solutions for it. First thing you need to know is that many financial institutions, service providers and businesses have been implementing special measures to help you with the overall challenges.
What major banks are doing
Many of Canada’s banks have implemented measures as response to Covid-19 to help individuals experiencing loss of income and businesses dealing with reduced profits. Here are the major highlights:
– Scotiabank – Offering up to three months of credit card payment deferrals and up to six months for mortgages.
– BMO – Deferral of payments on mortgages for up to six months and deferral of payments on loans and credit cards for a maximum of three months.
– TD – Up to six months of payment deferral for mortgages and opportunity for relief on other credit products.
– RBC – A one-month payment skip for credit cards, mortgages, personal loans, and other financial products for immediate financial relief. You can also receive up to six months of deferred mortgage payments for long-term financial relief.
– CIBC – Mortgage payment deferral for a maximum of six months and relief on other credit products.
The government of Canada has announced they will be placing a six-month, interest-free pause on the repayment of Canadian student loans for all student borrowers, known as moratorium. The Canada Revenue Agency (CRA) is also deferring filing and payment due dates for individual 2019 tax returns.
The purpose of the government and financial institutions allowing you to defer payments is to avoid further economic challenges for both businesses and individuals. Use this help to save for a financial emergency as no one knows what the future holds at this time.
During this pandemic, if you need extra financing options, you may consider the following:
This is a Home Equity Line of Credit that uses your home equity as security. (check our post on this) This can be seen as a second mortgage and an individual only qualifies for it if they own a home with positive equity.
– Debt Management Program
Our previous post was on this. It is a service offered by credit counsellors that consolidates unsecured debts into one larger monthly payment. The idea is to make debts more manageable, lower interest rates – if possible – and make it more affordable.
– Personal Loan
This a more flexible form of financing as you can use it for any purpose. They normally don’t require the use of collateral. When approved, you get a lump-sum payment and then you just have to make regular, scheduled payments which include interest and principal components.
As hard as it is to make ends meet, try to avoid missing payments. Even if you can’t make it in full, be sure to make the minimum payment, especially in credit cards, to avoid further problems and a negative impact on your credit.