With thousands of people in Greater Victoria facing job losses amid the COVID-19 pandemic, financial experts say there are ways to mitigate the resulting problems.
Relief packages are available from the federal government, and mitigation programs are being offered by the provinces, banks, utility companies and firms offering credit.
Scott Travelbea, principal at Travelbea and Associates mortgage brokers, said it’s important for people to develop a game plan, protect their credit ratings and be honest and open with lenders.
Travelbea said lenders are open to working with clients, and it’s better to ask before you get into trouble.
“They want up-to-date documentation to ensure people are still in their current positions,” he said, noting it’s much easier to ask for deferred payments, or to renegotiate lending terms, if someone is still employed.
Craig York, a Victoria-based credit counsellor with the not-for-profit Credit Counselling Society, agreed.
“It’s almost always an easier conversation to have ahead of it,” York said. “If you call before your payments are overdue, when your accounts are in good standing and explain the situation, then it’s often an easier conversation.”
York said a lot of people tend to suffer in silence when it comes to dealing with personal debt.
“Often, people feel like they’re dealing with it on their own, and some of that may be that they don’t know what to say, ask for, or know where to turn,” he said. “Often, being able to explain the situation and speak to someone can make things easier. And people are often surprised by what [lenders] are willing to do to make things easier.”
That might be especially true during this crisis, when everyone is in the same boat.
Credit-monitoring agency Equifax said the average Canadian consumer carries $72,950 in debt, $23,800 of it from credit cards, loans and lines of credit. In B.C., non-mortgage debt per person is estimated at $24,851.
During the COVID-19 crisis, the banks have said they are willing to discuss mortgage-payment deferrals with homeowners, and credit-card companies have offered reduced interest payments for some clients.
Both Travelbea and York say the key is having a plan of attack and acting while you have an income to get your ducks in a row.
That can start with looking at spending and asking hard questions about what you really need, perhaps making adjustments to your monthly outlay to improve cash flow.
Travelbea said improving cash flow can also include consolidating all debts into one payment while you’re still working.
“Whether that’s consolidation into a loan or a mortgage, you may want to look at that,” he said, adding it’s also about protecting your credit rating. “That way, when you do get through this, you can turn around and carry on — so that, down the road, if you need to borrow, you can.”
He said mortgage deferrals are one of the easiest options to improve cash flow in the short term, but he warned the banks are doing it on a case-by-case basis and are being flooded by requests.
He said on the first day deferrals were offered, one lender had 20,000 requests.
“The volume of requests is so significant that people are getting frustrated or concerned and it’s just that the banks aren’t able to keep up with the pace of change,” he said. “People have to be patient and if you can wait to defer then do so, because there may be others who need it more than you and they are clogging up the system.”
There is also a cost to deferring payments, as the interest that would have been paid is added onto the existing mortgage — which means homeowners will be paying interest on top of interest.
Travelbea said he has had clients come in to refinance and to ask for deferrals, but he has also had clients requesting new credit to invest.
“I do still have clients purchasing,” he said, noting a lot of Victoria’s workforce is still employed by the government, military and similarly stable employers. “I think our market will weather it better than others, for sure.”
York said most people he sees these days wonder how they are going to make their payments while their income is reduced or nil. He recommends ensuring they have applied for all the federal and provincial relief programs for which they might qualify, and that all unnecessary expenses are reduced.
The federal government, for example, has rolled out the Canada Emergency Response Benefit, a $2,000-a-month taxable benefit available to any worker who earned $5,000 in the previous year and whose income drops to zero due to COVID-19.
The Credit Counselling Society’s website, Nomoredebts.org, is compiling a list of resources as they are announced.
York noted that banks, credit card companies and utilities have offered leniency in repayment terms, reduced payments and deferrals. He suggested those who have incomes create an emergency fund that can be used in times such as these to tide them over until things normalize.
“It can be difficult to do, and, yes, it’s great advice for ‘next time,’ but a little bit put aside from every paycheque can be a help to get you out of a jam if there is a next time,” he said.
York warned people against relying on credit cards or lines of credit to weather financial storms, noting those balances will have to be paid down the road.
“If you can avoid them, it is best to do so,” he said.
York said one of the biggest challenges is dealing with mounting debt and a lack of resources for the first time.
“It can be overwhelming,” he said. “You really have to try and approach it level-headed and determine what resources you qualify for. People can get a bit lost, especially right now, as what’s available seems to change daily.”
