The past two weeks have been a non-stop train of breaking news as Canada copes with the novel coronavirus, COVID-19.
This public health pandemic is affecting many across the country — both medically and financially.
In order to “flatten the curve” and reduce the risk of infection, many businesses and public services have been suspended, including in some provinces:
- Public and private school closures.
- Daycare closures.
- Eat-in restaurant closures (take-out and delivery are still available).
- Temporary closure of non-essential businesses, such as clothing retailers.
- Temporary closure of public event spaces, such as movie theatres.
- The list goes on…
While all of these measures are meant to reduce COVID-19 risk and pressure on our healthcare systems, it has created another challenge: financial difficulties.
Many Canadians are now out of work, or unable to work due to the need for childcare or caring for those who are ill. While some are working from home, not everyone has that opportunity.
Businesses are also feeling the loss of income, and some have had to lay off employees temporarily.
While public safety is essential, there is no denying the challenge this has had on the Canadian economy — and that’s where emergency relief comes in.
Emergency Response Package
On March 18, 2020, Prime Minister Justin Trudeau announced an economic aid package of $82 billion. This includes:
- A temporary boost to Canada Child Benefit payments.
- A new Emergency Care Benefit of up to $900 biweekly, up to 15 weeks, to provide income support to workers who have to stay home and don’t qualify for paid sick leave or employment insurance (EI). This includes those who are self-employed.
- A new Emergency Support Benefit to provide up to $5 billion in support to workers who are not eligible for EI and who are facing unemployment.
- A six-month, interest-free reprieve on student loan payments.
- The income tax deadline has been extended to June 1, 2020 and taxpayers can defer tax payments until August 31.
- And more.
Mortgage Payments Deferrals
The Big 6 Banks announced on March 17 and 18 that they are taking measures to support customers on a case-by-case basis to provide solutions, including up to a six-month payment deferral for mortgages and the opportunity for relief on other credit products.
This is meant to help those who are facing challenges due to COVID-19, such as pay disruption, childcare disruption, or illness.
Customers are encouraged to reach out to their lenders to ask what assistance there is for them.
Bank of Canada Interest Rate
On March 13, 2020, the Bank of Canada announced an emergency interest rate cut to 0.75% — the lowest that it has been since 2017.
“It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy,” the Bank said.
The next Canadian interest rate announcement is scheduled for April 15, 2020. Economists are predicting the interest rate will be cut again.
The lower interest rate means that credit is easier to secure — and is especially helpful for variable-rate debts, such as variable-rate mortgages, credit cards, or unsecured lines of credit.
Putting It All Together — and Dealing with Debt
Let’s talk for a moment about the impact of all of this. While these are good measures temporarily, we must acknowledge that they are not necessarily long-term solutions.
For people relying on a certain amount of income to meet their bills, $900 biweekly is likely not enough to cover their expenses.
And then there is the matter of deferrals — whether that be deferring mortgage payments, student loans, income tax payment, or otherwise.
These payments will still need to be made eventually. Some of the details have yet to be confirmed, but consumers need to be aware that these payments are not just disappearing. These methods are meant to give you time to get the money together, when hopefully the economy is recovered, along with public health.
But (and there is a big but) the money will still be owed. You will still need to find the funds.
If you are currently earning less than you usually make due to COVID-19, or have a hard time meeting your bills regardless, other measures may need to be taken to get your finances on track.
These might include:
- Creating a budget and tracking expenses.
- Avoiding taking on more unnecessary debt, such as charging expenses to your credit card.
- Consolidating debt payments and paying off high-interest debt.
- Filing for insolvencies, such as bankruptcy or consumer proposal.
Take the time now to make a plan for your finances during the COVID-19 pandemic. If you are on the brink, contact a debt counsellor today.
Debt can weigh down your lifestyle, particularly when money is tight. If you have $10,000 in credit card debt, those payments can take away from your ability to pay the mortgage or rent, buy groceries, or pay utility bills. When every dollar counts, you don’t want any more than necessary going towards your debt payment.
At DebtCare Canada, we remain available by phone, text, or online across the country. We will talk through your financial options with you and help you find the best path forward for your unique situation during the COVID-19 pandemic or otherwise.
Contact us for a free consultation. Call or text “Help” to 1-888-890-0888 or visit www.debtcare.ca.
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