✔ Start by creating a debt repayment plan
✔ Take steps to rebuild your credit score
If you’re struggling financially right now, you’re not alone. The ongoing COVID-19 pandemic has created a financial emergency for many Canadians as over two million jobs were unexpectedly eliminated or put on hold. This wave of sudden income loss has put many families in a vulnerable state as most do not have a substantial emergency fund to fall back on. The average Canadian has approximately $200 in savings, and research indicates that 30% of Canadians would not be able to pay their bills after job loss due to COVID-19.
These are alarming figures, but they should also remind us that financial strain is incredibly common and nothing to be ashamed of. Instead, let’s focus on helping you rebuild after a financial emergency. Though it may seem daunting, it’s entirely possible and we are here to help.
Assess your debt and create a plan
While your income is being actively affected by COVID-19, the focus should be on having access to enough money to pay for baseline necessities (food, housing, etc). This may mean taking on some debt for a period of time in order to get by. This isn’t the same as overspending on a credit card; it’s a reasonable solution to a temporary financial problem that will help your family during a challenging time. However, once your income has been fully or partially restored, it’s time to look at debt repayment. Start by creating a list of what you owe, from credit cards to personal loans and additional debts. Determine how much money you can put toward debt repayment each month and start by paying down the balance with the highest interest rate. This is called the Snowflake Method.
It’s important to balance debt repayment with your savings goals, particularly when you don’t have an existing emergency fund. When determining how much of your income can be used toward debt repayment, ensure that you’ve also taken a small portion of that income for savings. It’s better to build up a little bit of savings each month and create a small emergency fund than to have no savings at all.
Take steps to strengthen and rebuild your credit score
If you’ve accumulated some debt and/or missed bill payments due to COVID-19, your credit rating may have been negatively impacted. Fortunately, your credit score is fluid and can be improved in as little as six months. Tackling your debt is a great place to start, but there are additional ways to strengthen your credit rating. Make an effort to pay your bills on time, as this shows reliability and will strengthen your position. If you aren’t able to pay the entire balance on your credit card each month, make an effort to pay more than the minimum.
It’s best to have only as much access to credit as you truly need, so get rid of any credit cards you aren’t using (one or two credit cards is plenty, and more than that could make you appear risky to creditors). It also helps if you have different types of credit, such as a mortgage, a line of credit or loan and a credit card, and can demonstrate responsible use of each. You can learn more about improving your credit score here.
Remember, when you rebuild your credit score, it has the added bonus of helping you secure lower interest rates in the future. This can be helpful if you want to fund a home renovation or major purchase, or if you unexpectedly need money to support your family.
Learn more about federal financial relief programs
Please visit our COVID-19 Resource Centre for more information on federal financial assistance programs that were recently implemented in response to the pandemic. The Canada Emergency Response Benefit is one of several measures that may help you at this time. If you qualify for any financial relief or income support through the government, it may be wise to start here. Our COVID-19 Resource Centre will continue to be updated in the weeks and months to come, so please check back regularly.
We’re here to help
If you’re dealing with income loss and would benefit from a personal loan to help cover the necessities of life, please contact your easyfinancial branch or easyhome branch. You can also give us a call at 1-888-502-3279. We know that each of our customers’ situations is unique, and are committed to working with you to help you find a solution that will best fit your needs. After all, we’re here to help.