COVID-19 has had its effect on everyone over the course of the past several months, but for millions of Canadians the pandemic has meant added financial stress and the threat of falling behind on bills or debt repayment.
From utility bills and mortgage payments to growing credit card debt, the payments can add up quickly. With no source of regular income and federal government programs either limited or coming to a close, Canadians needs options to get through these unique and trying times.
A recent study on COVID-19 revealed that 30 per cent of those in need of CERB were not eligible for it, and that only 12 per cent had extended savings to dip into for a few months. That means for many Canadians, accumulated debt is on the rise — more loans, bigger credit card expenditures — and that can only delay the hardships of a financial hole.
The good news is that some of those people are finding relief through payment deferrals, which allows them to hold off payments on certain bills until a later date. At least six of Canada’s major banks have been working with their customers affected financially by COVID by not only allowing them to delay payments but also set up doable repayment schedules that work for the individual.
“If you think you’re going to miss a payment, it’s important that you get in touch with your lender or creditor before it happens,” explains Caitlin Wood, Chief Content Officer for Loans Canada and Rate Genie . “Your service provider may be able to work with you by offering a payment deferral or alternative solution. Just make sure you contact them in advance of missing a payment.”
Any type of bill payment can be deferred, though the rules for each do change depending on the lender, but, in general, payment deferral options include:
Bill payment deferral — includes payments such as utility bills, phone bills or cable bills. Speak to your provider about your options for an installment plan, which could allow you to spread your balance over the course of several months and into reasonable figures that you can afford.
Mortgage payment deferral — Lenders will often offer these on a case-by-case basis. Contact yours to determine if you are eligible and if the added long-term commitment is right for you.
Car payment deferral — Falling behind on car payments can wreak havoc on a person’s credit rating. If you are in danger of missing a car payment due to COVID, it is important you speak to your lender as soon as possible. Lenders don’t want to see you default on a loan and will generally offer options such as ‘skip a payment’ or structured refinancing.
Credit card payment deferral — First you must find out if deferring credit card payments is right for you, as it is always best to keep up to date. Be sure to ask questions when speaking to your bank for options, as terms and processes vary, but you could qualify for a due date extension, or a hardship plan, or waived interest.
Loan payment deferral — Studies show that the majority of Canadians have taken out a personal loan of some kind, but it can be dangerous to your credit score if payments are missed. Speak to your provider for options on deferring loan payments to a later date.
Payment deferrals are an important option for struggling Canadians, but it’s important to understand that costs are often involved and so speaking to your provider ahead of time is crucial. Some deferrals will accrue interest, others have fees, and all will mean a longer repayment plan in the end.
There are also limitations to eligibility of payment deferrals, and, in general, a poor payment history could mean you are unlikely to receive one. But if you do qualify for a deferral, it shouldn’t affect your credit score — do check your credit report to be sure, as a lender or creditor could accidentally mark your payment as “missed/late” instead of “deferred.”
If you don’t think deferring payments is right for you, look into alternatives such as loan refinancing or debt consolidation. Ask your credit card provider if you’re eligible for a 0% balance transfer, and, if you’re able to you can even borrow from a family member or friend.
Banks and lenders are generally looking to work with you to help you stay in good standing. Many are offering lower interest rates and other financial assistance, as well as payment deferrals, in response to the COVID-19 pandemic. Reach out to yours and take advantage of what is available to you in a safe, responsible way.