4 tips to better your financial situation through COVID-19

Very few of us can say we’ve lived through something as staggering and financially disruptive as a global pandemic. What we are currently living through is so unprecedented—and for many people and businesses, so crippling—that it could never have been predicted. 

The present situation is proving extremely challenging economically for many Canadians, with more than a million people losing their jobs in the last several weeks. Despite the government's help financially through various relief programs, there are families who will, unfortunately, be in survival mode—doing whatever they can to make ends meet, praying that they make it out of the pandemic without being financially ruined. For anyone experiencing extreme difficulties, Refresh has many resources that can help navigate your way through these devastating times, from drastically cutting unnecessary expenses, to fighting your financial anxiety. 

Can you take advantage of the current situation?

For other people—those who still have their jobs and are perhaps working more than ever—this time of economic uncertainty presents an opportunity. Interest rates are at an all-time low and could continue to drop, so if you need cash for a future purchase, whether it’s a home, car, renovation, wedding, vacation, or you simply want to improve your current financial situation by paying down debts or building credit,  now would be a great time to set yourself up for success. 

Here we check out 4 of the ways you could take advantage of the current economic climate to make smart financial moves: 

1. Consolidate your debt 

If you are carrying a balance on high-interest credit cards and you own a home, why not look into applying for a low-interest home equity line of credit (HELOC) and use the funds to pay off the higher interest credit cards. With a HELOC you don’t pay the interest if you don’t need to use it, and if you don’t need to use it all to pay down your debts, it’s nice to know it’s there in case of emergencies. 

If you apply for a HELOC and use it to pay off other debts, you must be absolutely certain of your ability to make repayments, otherwise your house is at risk for foreclosure. A HELOC is a secured loan (secured by your home) which is why they can be offered at lower interest rates. The bank has the security of knowing that if you don’t make your repayments, the value of your house can cover the loan.  

If you find it difficult to get a low interest loan, look out for low interest credit cards. Some offer introductory interest rates and balance transfers so you can transfer your debt from your higher interest credit cards to a lower interest one. Commit to paying off the balance before the introductory low interest period is up for maximum cost savings.

2. Borrow money for your RRSP 

If you have significant unused RRSP contribution room and you feel like your retirement savings plans need a boost, now might be the time to take out a loan to make an RRSP contribution. Depending on your credit score, you could get a loan at a very low interest rate to contribute to your RRSP, which can significantly reduce the amount of taxes you pay next year. 

3. Refinance your mortgage

If you are currently locked into quite a high mortgage rate, it might be possible to make some savings long-term by refinancing to take advantage of lower interest rates. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance. If you decide to refinance your mortgage, there will likely be a penalty involved but it might be a case that the interest savings from refinancing could leave you better off. It’s worth looking into if you feel like your current mortgage rate is much higher than it could be. 

4. Build your credit score

COVID-19 has created a lot of economic uncertainty. When this happens, interest rates often plummet as lenders try and entice people back into borrowing to keep the economy running. This presents a great opportunity to get the house or car you’ve always dreamed of at a much lower interest rate. However, in order to qualify for those great rates, you must have a good credit score. We don’t know how long this situation will last for, or when interest rates will start to creep up again, so now is the time to quickly build your credit score to take advantage of the low rates. 

Build your credit score FAST with a custom credit building solution from Refresh.