The Covid-19 Canadian Debt Crisis
The global Covid-19 pandemic has hit millions of Canadians hard. Household debt that was once under control is now skyrocketing as businesses continue to remain closed, jobs remain on hold, and Canadians continue to dig deep into their life savings just to make ends meet. Read on to find out how the Covid-19 Canadian debt crisis is unfolding, what’s to be expected, and how to get a hold of your uncontrollable debt right now.
What is the Covid-19 Canadian Debt Crisis?
The Covid-19 debt crisis refers to the debt Canadians have accrued due to the unexpected job loss and market downfalls since the pandemic hit. Many have lost their businesses, their livelihood, their life-savings, and their investments have dwindled down to nothing. Whatever contingency funds they had, now gone just to keep up with mortgage payments. At the moment, there is still no telling when the economy will reopen and bring Canadian jobs back.
For those who already had debt, the Covid-19 pandemic certainly made it worse. The cost of essentials, like food, has risen dramatically as jobs have been cut and government aid has been barely enough for the average family to keep up. The debt crisis continues to worsen as some jobs risk being eliminated for good, even after the pandemic comes to an end.
The Covid-19 debt crisis has left millions of Canadians with even more debt and loads more interest accruing on top. Deferred mortgage payments have only set Canadians back by increasing their debt when there is still no end in sight. If you are one of the millions of Canadians who has spiraled out of control into the cycle of debt during this pandemic, you are not alone. In April of 2020, TransUnion conducted a survey in which 63% of Canadians reported being financially impacted by the pandemic. Read on to learn more about the Covid-19 debt crisis and how to get yourself out of it.
Household Canadian Debt Before COVID
Consumer debt was actually at an all-time high just a few months prior to the pandemic. Consumers were borrowing a lot and held more than $30,000 of unsecured consumer debt. They were already nearly at the breaking point trying to keep up with the incredible costs of living and the constant increase to daily commodities.
When the pandemic hit, already indebted Canadians were faced with even more economic uncertainty. With so many already filing for bankruptcy, the economy and the majority of Canadians faced serious financial distress.
Deferred Payments and their Contribution to Canadian Debt
Many Canadians were left with no other choice. They had to defer their mortgage payments because they couldn’t afford to make them, increasing Canadian debt substantially. However, deferred payments turned out to be more of a problem than a solution. This actually added even more interest to the Canadian consumer’s load. It was really a way for people to get a few months of mortgage payments, at a price. For some people, deferred payments spurred off a cycle of debt that became out of control relatively quickly.
In addition to the extra interest from deferred payments, some Canadians ended up owing larger sums to more than one creditor thanks to loan deferrals. This left them with no way of being able to catch up. The higher the debt, the higher the minimum payment. With limited government assistance and no job, even minimum payments can be tough to make.
Financial Challenges One Year Later
Now, one year into this worldwide pandemic, some Canadians are finally finding work again as things slowly begin to readjust and open up. However, the debt accrued over the last year of uncertainty won’t be easy to overcome, especially not for those Canadians who have had to settle for lower paying jobs just to have a regular, stable income again.
Interest rates are set to increase very soon and likely before most Canadians have had a chance to catch up on any of their payments or debts. Predictions from most financial analysts predict a further downfall for the average Canadian. If you are currently in debt and don’t know how you’re going to escape it, the rest of 2021 could present even more challenges for you in the next few months.
How Much is Too Much Canadian Debt?
Too much debt for a Canadian is generally viewed as anything that exceeds what the consumer can afford to pay back in a reasonable time frame. If you can’t see an end to your debt, you owe too much. However, to be more specific, most banking institutions will deny you a loan if you currently use 40% or more of your income to pay down debts.
When Canadian debt is high, it means many households are at risk for financial distress. The best thing you can do is get your debt under control before you acquire even more of it as you move forward.
How Canadian Debt Can Affect Families
As household debt rises, more and more Canadian families are finding themselves left with few options for regaining control of their financial future. If you are raising a family, you know that essential expenses like food, clothing, and school supplies for your children still cost money – whether you are in debt or not. The long-term job losses and extended business closures have left of millions of Canadians without disposable income, depleted their savings, and has forced them to leave their homes and downsize substantially.
Raising a family in the midst of a pandemic has been challenging – to say the least. If you are a Canadian raising a family who is facing insurmountable debt due to the Covid-19 crisis, we can help. At BHM Financial, we can offer you a variety of different loan options to help you get access to the funds you need to maintain your children’s lifestyle and pay off debts to creditors. Consolidating your debts will help you get a handle on your debt and minimize your interest payments, as well as the number of payments you need to make each month.
How Can a Family Get Out of Debt?
Getting out of debt when a huge chunk of your expenses are essential can be tough but there are a few things you can do to get ahead, even during a pandemic. Here are some examples to help you get out of debt:
1. Take a Loan Against Your Home
A home equity loan is a great way to leverage a valuable asset you have to provide you with the cashflow you need to pay off creditors. It also helps your credit score by classifying your debt as a secured debt (based on collateral) as opposed to an unsecured debt (a debt without collateral). This can help you pay down your debt and get rid of the stress of making several minimum payments per month.
2. Reduce Your Expenses
This isn’t always an option, but if you can, cut back on at least some expenses. By keeping track of your spending with a spreadsheet, you’ll be able to see exactly where your money is going and whether or not you are overspending. Even small cutbacks can help you cut down your debt quicker.
3. Take on a Side Job
If you are in need of funds to pay down your debt, consider looking for a part-time job to help you through the hardest times of your life. For those who have lost employment during the pandemic, job supply is definitely low. But you can always supplement your income by taking a lower paying job in the interim, while you wait for your original job a similar position to open up for you again. The sooner you bring in income and start paying your debt, the sooner you can get out of it.
4. Don’t Make More Debt
The best way to avoid incurring more debt is to make a realistic debt repayment plan for yourself. If you make a plan that is too aggressive, you are more likely to fall off the wagon and then wind up in even more debt.
5. Use Extra Funds to Pay Your Debt
If the end of tax season comes with a surprise lump sum tax return, don’t run to spend it. Instead, put that unexpected bit of money towards your debt. Remember, you are paying interest on your debt. The sooner you pay it down, the more money you will be saving in the long run.
6. Ask for Help
Getting out of debt while raising a family – particularly during a global pandemic – is no easy feat. The stress alone is enough to wear you down completely. Instead of running the same scenarios through your mind each day, meet with a financial expert instead. The experts at BHM Financial will help you figure things out. They can help you consolidate your debt, develop a realistic repayment plan for you, help you with budgeting and saving in the future, and provide you with the financial advice you need to understand how to pay down your debt in the most efficient way possible.
Canadian Debt and Stress
Throughout the pandemic, we’ve seen the headlines all over. The extra stress of a complete lockdown across the nation has led to an increase in divorces and sadly, in domestic abuse, as well. The stress financial ruin, being confined, and not being able to determine when life will resume to something resembling normal has been a stress on everyone’s plate. However, financial stress – not knowing whether or not you can afford to keep feeding your children – has been the biggest stressor of all.
Debt leads to increased stress and even more so during this pandemic. It can be devastating for families, relationships, and your health. Tackling debt and trying to figure out how you’ll pay it off can add tremendous stress to your life. That means it’s time to seek financial aid.
How to Deal with the Covid-19 Debt
If you’re suffering from debt due to the Covid-19 pandemic, you’re not alone. The sudden and abrupt drop was one that no one expected. Though financial experts had been calling for a market decrease in the months prior to the pandemic, no one could have predicted to what point the economy and citizens all over the world would suffer due to a rapidly-spreading virus. The quick turnaround left so many people without many options.
In Canada, we are fortunate enough to have had the opportunity to receive CERB benefits among other financial aid to help both individuals and businesses. However, the longer the pandemic has been going on, the less that aid has been helping. Millions of Canadians are still finding themselves unable to make ends meet, with depleted savings accounts and a mountain of debt.
If you are suffering from debt, there are a few things you can do to get your finances in order:
1. Take Out a Loan
If you owe many creditors money – or worse, owe the CRA money – you need access to funds, fast! These debts will impact your credit score, which can cause damage for you long after the pandemic is over and done with. If you owe money, the best thing you can do is sit down with a qualified loans officer at BHM Financial and figure out the best way to reduce your debt and make your repayment plan feasible for you.
2. Ask for Advice
Our financial experts won’t just sign you up for a loan and move on. Our goal is to educate you and give you the tools you need to navigate this uncharted territory right now and get your finances back on track. Don’t want until your debt situation is completely out of control. Meet with us today to see how we can help you today in the months to come.
3. Seek Counselling
If you are suffering stress due to the Covid-19 pandemic or your debt load, it’s always best to seek professional counselling. Stress can become too much for anyone really quickly. Before your stress takes hold of your life and worsens your situation, seek the help you need to get your life, not just finances, back on track again.
Why Don’t I Just Get a Loan from the Bank?
In theory, you could. However, when you have bad credit, a huge debt load, or more than 40% of your disposable income is already going towards paying debts, traditional banking institutions will more than likely refuse you. Banks are only your friend when you are financially well off and paying your bills on time. When you hit hard times, the bank isn’t working for you – they’re working for them.
At BHM Financial, we don’t work with anyone else. That means we approve all our loan requests ourselves and lend the money out to our clients directly. We can get you same-day approval. Plus, we offer bad credit loans. We know bad credit doesn’t mean you are irresponsible. It just means you’ve hit some hard times and need a helping hand – as millions of other Canadians do right now.
BHM Financial aims to get loans for people who can’t get loans elsewhere, but still need an adequate solution to get their troubles under control.
How Does a Loan from BHM Work?
After meeting with a BHM Financial expert, you will be able to better understand which type of loan is best for you and why. You can choose the appropriate loan for your needs and develop a repayment plan that works for you with the help of our experienced staff. In addition, our BHM Financial experts will work with you to help you create a budget based on your income, needs, and lifestyle. This will help you stick to your repayment plan so you can finally bring yourself out of this unexpected debt.
Once you have a reasonable solution in hand, you can begin making your payments. Once you have made a few timely payments, you’ll notice your credit score starting to improve right away. Building good credit is essential for your financial future. A good credit score can help you get a better job and get you approved for affordable housing. Poor credit can have a negative impact on your ability to do these things. It can also mean extremely high interest rates from other financial institutions.
If you’re ready to get a handle on your Covid-19 debt and get your financial future back on track, call us today. We can help you deal with the Canadian debt crisis on an individual level and bring you back the feeling of security you had before the pandemic hit. Give your children the life they deserve and continue raising them as planned with a little help from BHM Financial. Not sure which loans products are right for you? Just ask us for information and you’ll instantly see how we can help you get your debt situation under control and back down the path to financial freedom!