These are unprecedented times so it is important to plan wellFrank Conway – Founder, MoneyWhizz
The onset of the Covid-19 emergency has upended our lives and resulted in many people suffering significant reductions in income. These are unprecedented times and to compound matters, nobody can predict when it will pass and our daily lives begin to return to a state of normality.
With so many considerations, health, social, economic, financial well-being is also a major one for tens or hundreds of thousands of people across Ireland. This number can only be expected to grow as the Covid-19 emergency escalates. One thing is for certain, the entire period will be extremely unpredictable for all.
While this is an extremely stressful period, it is inevitable that various financial transactions are factored and planned for. Financial stress can have a serious impact of physical and mental wellbeing so you should look to reduce financial stress where you can. To achieve this, it is vital that a broad system of prioritising the most important financial considerations be put in place. In this article, we deal with how one can put a process in place that can reduce and eliminate financial stress.
Evaluate the situation – as soon as you realise you are in a financial emergency; it is vital you take some time to carefully assess your immediate situation. While Covid-19 represents a threat to each and every one of us, getting into a panic and becoming stressed will resolve nothing. Yes, a little panic can push us all to take action, what needs to be avoided is becoming so stressed, we become frozen by fear. It is vital that you are able to make clear decisions and avoid making mistakes that might cause increased hardship later.
Prioritise your expenses – a household has many expenses but some are more important than others. If you have lost income through redundancy or reduction in hours, it is important to list out your most important bills and take care of them first. To a large degree, some spending habits are now automatically off-limits under the Covid-19 emergency, including restaurants, cafés and bars. But there are other expenses that may be still being taken from your current account through direct debits that you will need to review without delay including online subscriptions.
Contact your lenders –
Mortgage and loan repayments arrangement during the COVID-19 emergency
The retail banks (AIB, Bank of Ireland, KBC, Permanent tsb and Ulster Bank), non-bank mortgage lenders (Finance Ireland and Dilosk/ICS Mortgages) and credit servicing firms (Investec Private Finance Ireland Ltd, Lapithus, Link Group, Mars Capital, Pepper and Start) have put in place measures to help personal customers and businesses during the Covid-19 emergency.
The following are the key elements:
• A payment break for up to three months is available to both personal and business customers. This can be followed by ongoing reviews depending on the scale and extent of the situation
• Court proceedings are being adjourned for three months
• Various working capital facilities and supply-chain supports are available to businesses
What is a payment break?
Mortgages (for private dwellings and buy-to-lets), personal loans and business loans may be frozen for up to three months, to be followed by ongoing reviews depending on the scale and extent of the situation.
Payment breaks can take a number of forms depending on what best suits your specific situation.
1. ‘Moratorium’ Payment Break – generally this means that your full loan repayment is postponed for an agreed period of time so you do not pay any capital or interest. Ordinarily, at the end of this period, loans return to full capital and interest payments. At the end of the agreed period, your future loan repayments will increase so that the loan is fully repaid within the original term of the loan
2. ‘Interest Only’ Payment – you pay only the interest due on the loan during the agreed payment break. You do not pay any capital which means that your repayments will be less but also that your loan balance will not reduce during this period.
Ordinarily, at the end of this period, loans return to full capital and interest payments. At the end of the agreed period, your future loan repayments will increase so that the loan is fully repaid within the original term of the loan
How does a payment break operate?
A payment break effectively gives you breathing space – a period of time during which you do not have to make repayments on your loan. For example, if you take a mortgage payment break of up to three months, your lender will ordinarily spread your repayments over the remaining, outstanding term of the existing mortgage so that your mortgage is repaid within the original term. Where you have the capacity to do so, another option which may suit you would be to pay the interest as it arises during the payment break. Either way a payment break will give rise to higher repayments spread out over the remaining term of the loan.
How to apply for a payment break!
Contact your lender to request a payment break. Each lender is putting in place a streamlined and simplified application process; this may vary across lenders. Keep in mind that all lenders will be dealing with a considerable increase in queries and applications at this time, so you may not get through right away so keep trying.
Should you ask for a payment break if you can still make full repayments?
Not all borrowers will need a payment break and it is important that customers who can afford to continue making repayments should do so – that way debt is not built up unnecessarily. Additionally, not all customers will need the same form or length of a payment break; and lenders may need to tailor something different depending on individual circumstances.
What happens at the end of a mortgage payment break?
At the end of a payment break your ongoing payments will be recalculated to include the interest charged during the payment break. These payments will be higher – reflecting the three missed payments and the interest charged
Find extra money – we actively encourage people to have several months day-to-day living expenses saved by way of an emergency fund. However, these are extraordinary times and some people may not have the cash reserves. If you have access to credit and loans, use them as a last resource and don’t be afraid to use them. For example, if you have a credit card balance, switch to making minimum payments. Also, if possible, even look to switch credit card provider if you can get an interest-free period. You can check out the best deals on credit cards, including possible switching options at the Competition and Consumer Protection Commission (www.ccpc.ie) or on Bonkers (www.bonkers.ie). Switching for a 0% balance for an introductory period is the same as free money for that period. So, look to take advantage of what offers are available. As we keep saying, these are extraordinary times so lenders are generally looking to do all they can to ease the financial stress.
If you have some investments or even access to retirement fund tax-free options use them. While this is not an ideal time, it is a time to survive. If you are over 50 and have a private pension, it is possible to access some tax free funds of up to 25% of the current value (up to a max of €200K) from a Buy Out Bond or in cases where you are leaving service. In such situations, talk to your employer or pension administrator. There are also some tax-free pension options available to those with private pension funds where they are being made redundant so it is important to get specific advice from your pension adviser. You can also check out the Pensions Authority (www.pensionauthority.ie) or Citizens Information (www.citizensinformation.ie).
If you plan to talk to friends and family for financial support, do so with caution. Some may have a financial cushions and may be able to provide temporary assistance, others may not so don’t take a refusal negatively, it could mean that people may not have the ability to offer financial support.
Take advantage of available supports – regardless of whether you are employed or self-employed, you are entitled to a range of financial supports, including job seekers allowance. If you lost a job, you may be entitled to a repayment of income tax so it is important you become familiar with these may relate to your immediate situation.
Our Government has taken the extraordinary step to announce the COVID-19 Pandemic Unemployment Payment is being increased from €203 to €350 per week. It is available to all employees and the self-employed who have lost their job due to the Covid-19 (Coronavirus) pandemic.
The Covid-19 Pandemic Unemployment Payment will be in place for the duration of the crisis.
If you have been temporarily placed on a shorter working week, you may qualify for Short Time Work Support.
How to qualify
You can apply for the new COVID-19 Pandemic Unemployment Payment if you:
- are an employee or self-employed
- are aged between 18 and 66 years old
- live in the Republic of Ireland
- have lost your job due to the COVID-19 (Coronavirus) pandemic
- have ceased trading if self-employed due to the pandemic
The payment also applies to
- non EU/EEA workers who have lost employment due to the COVID-19 (Coronavirus) pandemic
- students (and non-EU/EEA students) who have lost employment due to the COVID-19 (Coronavirus) pandemic
- part-time workers
Rate of payment
The COVID-19 Pandemic Unemployment Payment is paid at a flat rate of €350 per week for the duration of the pandemic emergency. It was originally set at a rate of €203 but it was increased by government on March 24.
Payment is made by electronic transfer only (into your bank account) and only into accounts held in Irish financial institutions. It will be paid in to your bank account every Tuesday once your application is processed.
If you were working and were also in receipt of any social welfare payment such as a Carers Payment, Working Family Payment (WFP) or One-Parent Family Payment, you can, provided you have lost your job due to COVID-19, also claim the COVID-19 emergency payment, in addition to retaining your existing welfare payment. The COVID-19 Payment Unemployment Payment will replace your employment income and will be regarded by the Department as equivalent to employment income.
If you have one adult and at least one child dependant you should claim a Jobseeker’s Payments instead of the COVID-19 Pandemic Payment.
This is because you can claim an additional allowance for your adult dependant and child dependants, which will bring your weekly payment to in excess of the €350 weekly payment due under the emergency COVID-19 Pandemic Unemployment Payment.
The quickest and easiest way to apply for the emergency Covid-19 payment is by applying online at mywelfare.ie.
All you need is your email to set up a basic MyGovID account which then allows you to apply online.
To learn more, there are three primary State services where you now need to familiarise yourself with:
Revenue – www.revenue.ie
Citizens Information – www.citizensinformation.ie
The Citizens Information website is an excellent service offering a wealth of consumer information that spans many Government services. From it, users are often directed on a range of options available to them.
In the meantime, protect yourself and your family. Be careful and be safe!
Frank Conway is a Qualified Financial Adviser and Founder of MoneyWhizz.org, the financial wellbeing initiative