Impact of Covid-19 on your personal finance and what you can do
This is a guest post written by Good Nelly from mywayofviewing blog.
The world is not going through a single pandemic. Most of the countries are actually struggling with two pandemics, one Covid-19 and the other, the financial impacts of it. The pandemic of anxiety is engulfing people and the UK is not left behind.
About a million people can lose their jobs due to this pandemic in the UK. The economists are fearing that the unemployment rate can rise from 3.9% to about 8% due to the financial crisis.
Many experts are predicting it’ll take long to overcome the financial crisis. Actually, at this time, we are concerned about our physical health, mental health, along with our financial health.
Let’s have a look at the present crisis and what impact it can have on personal finances.
Covid-19 – Impact on finances
It goes without saying that such a pandemic will have a significant impact on your finances. However, the government has taken a few measures to help consumers.
Are you behind on your credit card and personal loan payments?
The FCA (Financial Conduct Authority) in the UK has designed some rules to help the consumers deal with the present situation. Most probably, there will be a payment freeze on credit cards and loans for people who’re struggling with debt. The rules are supposed to be enforced from the 14th of April 2020.
To help consumers, FCA has announced a temporary payment freeze for up to 3 months. The banks also won’t suspend the credit cards during this period.
So, if you’re facing problems in making payments on your personal loans and credit cards, you can ask for a pay freeze for about 3 months.
The loans which are covered under this rule are credit cards, store cards, personal loans, guarantor loans, etc. However, it won’t benefit you if you’re struggling with payday loans. However, TCA has announced that they’re looking into these things and other special areas of lending.
But, business credit cards and peer-to-peer loans are excluded from this.
And, another thing, you can apply for this credit freeze, whenever you want to. You don’t have to do it immediately.
When we’re talking about all this, you must be thinking about what will happen to your credit report and score. TCA has clearly mentioned that this payment freeze won’t affect the credit file of the consumers.
So, it can be inferred that if you’re struggling to make your payments because of a job loss, it will help you. You can ask for a deferral of payments for 3 months. It will help you to meet your daily necessities and give a breathing space to your budget.
Are you thinking about your mortgage payments?
Well, the payment freezes are not free. So, if you’re opting for a payment freeze, then you’ll have to pay the interest that you’ll be accruing on your mortgage loan during this deferral period.
However, the homebuying process has nearly come to a halt since the prospective buyers are not allowed to make home visits now. This is to reduce the chances of getting infected by Covid-19 or infecting others.
It will be difficult for you to buy a home if you’re a first-time buyer. This is because the lenders are not willing to offer mortgages to high-risk buyers, who also opt for relatively lower down payment.
However, if you want, you can take advantage of Help to Buy equity loan schemes. It helps consumers who want to purchase new-build properties.
If you’re a first-time buyer and can wait for some time, then it’s wise to wait for a couple of months until the situation is under control. Some of the experts are of the view that the developers can offer certain incentives to entice the buyers to purchase properties.
So, it can help you manage your personal financial situation in a better way.
The impact on grocery sales
Consumers have started spending quite a lot on grocery stores across the UK. As per statista.com, as compared to this time last year, grocery sales have increased by double digits for Ocado, Aldi, Iceland and Lidl. The big four supermarkets (Teso, Asda, Sainsbury’s and Morrisons) have seen their biggest increase in sales in terms of sales numbers.
Find more statistics at Statista
Owing to the fear of uncertainty, initially, people were spending a lot of money to buy essentials like sanitizers, maks, groceries, toilet papers, etc. As a result, the price also increased. However, the panic buying has reduced. The stores are also equipped with the essentials. So, don’t spend a lot on groceries and waste your money. If you buy a lot, certain items will perish and your money will be wasted. So, buy what you can consume within the mentioned date.
What if your bank doesn’t agree to the payment freeze?
Yes, a bank or a lender can refuse the payment freeze option.
As per FCA, “A firm should grant the customer a payment deferral for three months unless the firm determines (acting reasonably) that it is obviously not in the customer’s interests to do so.”
It may happen that it will increase the debt burden of the consumer. However, the bank can offer other ways to help you, the consumer. It can extend the term of the loan, waive off or reduce the interest rate of the loan.
In this regard, I would like to mention that you can opt for debt relief programs if you’re facing any financial difficulty and can’t manage it on your own. Depending on your financial situation, you can opt for debt consolidation or IVA (Individual Voluntary Arrangement). If you opt for consolidation, you’ll pay your unsecured debts in full. But, if you can’t do it now, you can opt for IVA and get rid of your debts by paying less than what you owe.
To conclude, I would say that this difficult time will pass. Don’t worry so much. Just take the precautions and stay safe. We will definitely overcome this pandemic globally.
Let’s be optimistic. Take care!