How to pay off COVID debt

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EBT worries are rising in households as the coronavirus causes pain for longer than any of us wanted.

As states tighten their restrictions amid COVID-19 lockdowns, the financial hit has grown bigger for millions of Australians, and those who owe money are even more vulnerable.

Fortunately there are safety nets in the form of government subsidies and debt repayment holidays for those who are struggling, but some households slip through those.

People lucky enough to keep their jobs are benefiting from record low interest rates combined with cash savings, such as not paying for overseas holidays.

Knowing how to deal with debt at this time is an important step towards emerging from COVID-19 in a better financial position, or at least limiting your losses.

Banks were quick to offer mortgage repayment holidays to people who lost income, and many have extended these where needed by four months beyond the original end date of September.

They are likely to be lenient to those in trouble if this second COVID-19 wave continues or spreads, so talk to your lender if repayments are still a problem.

Lenders don’t want to be evicting people in droves because forced house sales would hammer down house prices, smash the economy and cause banks to lose more money than they need to.

Credit cards, store cards and buy now, pay later schemes are examples of consumer credit with the potential to force people into a debt spiral.

It makes no financial sense to have a credit card debt charging 20 per cent interest if you have money in savings or your mortgage. Always try to pay off your highest-interest debts first.

If you’re struggling, speak to a financial counsellor for free on 1800 007 007.