Crises like the coronavirus pandemic can have staggering consequences on economies, negatively impacting household and business activity. The shutdowns required to contain the virus mean more businesses are unable to employ people. In turn, this heightens the risk of unemployment and reduced income for households.
In these uncertain times, it’s more important than ever to act proactively to maintain financial health. Keeping your finances as well managed as possible could give you a buffer against further shocks. Given this, what can individuals and households do to maintain their financial health in such challenging times? These strategies could help you stay on top of your finances.
The coronavirus pandemic has left 3.8 million Australians with fewer work hours and stood down 2.7 million workers. Half a million have tapped into their super early through the special COVID-19 early access rules. The economic downturn is likely already widening the preexisting gap between
Australia’s affluent and the poorest segments, and between the young and the older segments of the population. When the crisis comes to an end, numerous Australians, especially casual employees, and other vulnerable workers could be left with significant debt, poor credit ratings, and other financial challenges that lengthen the time it takes to restore their financial health.
1. Take advantage of government support
Given the sweeping impact of the virus, it’s not surprising the government has implemented a range of stimulus and support packages. The first thing you should do is to find out whether you’re eligible for these support measures. Individuals and businesses might be able to apply for JobSeeker for the early release of super, business cash flow assistance, and more.
The government support you’re eligible to access could cover household expenses like groceries, rent, and mortgage repayments, and so allow you to stay financially healthy during the crisis.
2. Review debt
Review your loans and check whether you might be better off refinancing. With a car loan, if it’s been a while since you signed up, there might be more competitive deals out there. With more online and non-bank providers out there, you could have more choices and access lower rates.
Similarly, if your credit score has improved since you secured your original loan, car finance companies could be more likely to give you a lower interest rate. You could end up paying far less in interest over the course of the loan whilst making your repayments more affordable. However, do check any costs associated with refinancing before you commit. You might need to pay an exit fee for the existing loan and additional fees for the new car loan.
3. Take advantage of low-interest rates
The low-interest-rate environment could also make it an ideal time to consider refinancing your home loan. Refinancing your home loan could see you save a considerable amount of money each month, helping make your repayments more manageable.
It could reduce your total repayments by thousands of dollars or more and cut years from your loan. When refinancing, consider whether you’d like to add features to keep your options open. For example, an offset account lets you further minimize your interest, whilst a redraw facility gives you the option to take out any extra mortgage repayments you’ve made.
Before you do start the process, check your likelihood of getting approved, since lenders might be stricter than before about approving refinancing. Note also your property could be valued at a lower price than you might expect, given the current economic climate. Confirm your employment stability with your employer, and consider whether your credit score, built-up equity, and overall financial situation makes you a good refinancing customer for the lender. With many of us spending more time indoors than we’re used to, home renovation financing is also on the rise, which will likely have a positive impact on your property value.
4. Shop around for deals
Whether you’re refinancing a home loan or car loan, remember to shop around to find a competitive interest rate. Keep in mind you have the option of consolidating other debt (such as personal loans, car financing, and credit cards) into your home loan. Property loans tend to offer the best interest rates as your home acts as a security, so you could end up massively reducing the amount of interest you pay on your debt by taking this approach.
5. Apply for relief support
Finally, if you’re having financial challenges, contact your lenders about their coronavirus financial hardship programs. Banks and non-bank lenders have introduced a range of relief packages to support their customers throughout the crisis.
Some of the features you could access include repayment pauses, lower repayment, reduced interest rates, and no late payment fees. However, you’ll usually need to be proactive about requesting hardship access.
Summing up
The coronavirus pandemic has left a lot of individuals, households, and businesses struggling financially. In this period of uncertainty, continue tracking your expenditure and try to save as much as possible. Keep working towards your financial objectives but stay flexible as you do.
Manage your debt by looking to hardship programs and by exploring options like refinancing, which can see you minimizing repayments, loan terms, and/or total interest. Adopting the right mindset and staying positive can enable you to weather the biggest storms, so focus on what you can do rather than on the uncertainties. Remember, lenders know it’s a challenging time for their customers, so be ready to reach out and ask for any support they’re offering.
