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This Christmas will perhaps be our most important one ever – the chance to regroup and express gratitude for everything we still have in our lives, after a year marred by bushfires and COVID-19.

While it won’t be business as usual, these tips will help you make the most of the festive season.

1. Get back to basics

With borders closed and travel restrictions in place, why not recreate memories from your backpacking days and take the family camping. Alternatively, rent a campervan and hit the road to take in Australia’s beautiful attractions. You could even buy one with the money you would have spent on an overseas jaunt.

2. Try a gift trade-off

If money is tight, try swapping presents for time. That could be time spent:

 

• together on a family holiday
• helping elderly relatives or neighbours in the garden
• baking gran’s favourite biscuits
• volunteering at a homeless shelter or animal refuge

 

Memories are generally more valuable than gifts anyway.

3. Redeem points

Don’t spend money, spend points instead! Chances are you have unused points on frequent flyer schemes, credit cards, supermarket loyalty cards etc. Especially if you’re cash-strapped, redeeming points is a great and free alternative.

4. Don’t blow the budget

Aussies have collectively repaid over $5 billion in credit card debt since COVID hit. Don’t squander those efforts: bank that win and stick to your budget this Christmas. Beware of overusing buy now, pay later services like Afterpay too – they help cash flow, but can affect your borrowing capacity (banks see this as you lacking financial discipline).

5. Shop wisely

Fraudulent Facebook ads, bogus emails, fake door-to-door salespeople – these scams have stolen more than $22 million from Aussies so far in 2020. So, be smart about where you shop online. That doesn’t mean you can’t support small businesses you’ve never heard of before. Just do some research to ensure they’re legitimate.

6. Get in early

Delivery volumes have soared as COVID pushes more people online – Australia Post parcel deliveries surged 54% this July compared to July last year. Couple this with less air freight and social distancing restrictions in packing warehouses, and it’s no wonder there are shipping delays. Be organised: do your shopping earlier this year. That will avoid disappointments and, more importantly, won’t force you into buying secondary gifts because the first ones didn’t arrive in time.

7. Empower others

I generally prefer gifts that help people improve themselves. Experiences, books, cooking/pottery/photography classes – something that allows the recipient to learn fun and useful new things. They may even learn something that could earn them money.

8. Play it safe

We don’t know if/when a next wave could strike; if we could be forced into isolation or become sick; nor when/how quickly the economy will bounce back. Anyone could lose their income or health in 2021. Therefore, consider setting money aside in case things go pear-shaped. A ‘better safe than sorry’ mindset will make for a happier new year than one of ‘let’s blow it all now and hope for the best’!

9. Remember the true meaning of Christmas

This year especially, remember the true meaning of Christmas. There’s lots we can do to spread joy and hope at a time when so many are struggling. Send Christmas cards to let people know you’re thinking of them. Bake goodies as gifts for neighbours who live alone. Support local jobs by buying Australian made gifts from Australian businesses. Donate to worthy charities – you’ll even get a tax deduction on donations over $2.

The key is not to get in over your head. A little planning will ensure that joy you’re spreading doesn’t come with a nasty debt hangover.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Six months after the introduction of deferrals, many Australians who requested one are now starting to resume their repayments for their deferred loans.

According to data released by Australia’s banking regulator, the Australian Prudential Regulatory Authority (APRA), at the height of the pandemic nearly 500,000 home loans had received payment deferrals, but by the end of September the number of home loans deferred had fallen to less than 325,000.

For those Australian households whose initial six-month deferral has yet to expire, it is important to be aware that an extension of up to four months may be available but will not be automatic. The additional pause period is still only a temporary measure and it will be reserved for those customers who really cannot afford to make repayments right now but have a reasonable chance of doing so if given additional time.

Plus, for most loans, the interest charged isn’t going anywhere; it has still been accruing and will be added to the balance of your loan.

So, whether you are on your initial deferral or an extended deferral, what can you do if you find that you need more time before you can restart payments?

Your lender may agree to extend the pause or deferral for a few more months, if they can see that you have a reasonable chance of making repayments at the end of that time. However, you need to carefully consider whether it is in your interest to ask for an extension if you can’t – and probably won’t be able to – start repaying within a reasonable time.

Act early

Over the coming months, some Australians will unfortunately need to recognise that they won’t be able to repay their debts even if their lender agrees to extend a payment pause or deferral for a few more months – and they will need a more permanent solution to their debt situation.

Recognising this early on, and taking steps to deal with your loan or loans on your own terms, should help you in the long term, including by minimising the impact of extra interest that is being added to your loan.

Acting early may also help protect your credit rating. If you’ve agreed a COVID-19 payment pause or deferral with your lender, your credit report will not show any missed repayments and your lender will not report that you’ve ‘defaulted’ during the pause or deferral.

However, this is only temporary, and your lender may, in the next few months, start reporting whether you have been making your payments on time. Eventually, if you don’t pay your loan for an extended period, your lender may also report a ‘default’ on your report. Your repayment history stays on your credit report for two years. A default stays on your report for five years (even if later paid) and will make it harder for you to get credit in the future. Recognising now that you may not be able to afford the loan in the long term – and taking action to come up with a permanent solution  – may help you avoid having negative information recorded on your credit report or reflected in your credit score.

Consider other ways to deal with the debt

If you’re struggling to repay your debts and you don’t think an extension of a few months will help – or your lender won’t agree to an extension – you still have options to help you deal with that debt. These options will depend on your situation and the types, value and number of credit accounts that you have.

Importantly, taking action to find a permanent solution to your debt situation will help you deal with the stress and uncertainty that come from not being able to make your repayments. For example, agreeing to a permanent solution with your lender will mean that you won’t receive debt collection calls from the lender.

Many lenders will consider requests to waive some of your debt if you show that there’s little possibility of you being able to pay them. If you can offer a portion of the value of the debt, some lenders may accept that in full and final settlement of what you owe. Ultimately, bankruptcy may be an option for some Australians (although it’s worth looking at the other options first as this step may not be necessary if you can get your lenders to agree to a different approach).

Some customers may need to consider whether they should sell their home or investment property if they can’t restart paying in a reasonable timeframe. Being in control of how and when your house is sold may even help you to maximise the amount of money that you take away from the sale – this is known as ‘equity’ and is equal to what your home is sold for less what you owe and what it costs to sell the house.

Talk to people you trust

Recognising that you can’t afford to repay your debts is a big step at any time, and the uncertainty caused by the COVID-19 pandemic makes it even more difficult to make important life decisions.

Working out what options are available to you is not something you need to do without first talking to people you can trust for advice.

Talking to your bank or lender is a great start. Reliable, free financial counselling is also available from services such as the National Debt Helpline (ndh.org.au – 1800 007 007). ASIC’s MoneySmart website also contains a list of free counselling services (moneysmart.gov.au/managing-debt/financial-counselling)

Talking to a financial counsellor is particularly a good idea if you have loans with more than one lender as they may be able to help you to agree something with all those lenders.

Take care to avoid businesses that offer a quick and easy ‘fix’ to your financial problems. These services are usually costly, ineffective and may involve taking out more loans – which can make your financial situation even worse.

Take the next step

If you can’t make your repayments at the moment (or won’t be able to when your arrangement with your lender is due to end), the following questions will help you work through your options.

If you answer yes to these questions, it may be a good idea to talk to your lender or a free financial counsellor about your options.

Those options may not be easy, but they could save you money in the long term and help you keep control of your financial future.

 

• Were you in trouble with your finances before the COVID-19 pandemic?
• Has your income permanently dropped?
• Will your financial situation get worse?
• Have your other unpaid expenses shot up during the pandemic?
• Have you already tightened your belt as far as you can?
• Are you finding that the personal toll of dealing with financial stress is too much?

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Mortgage holders and business operators are being encouraged by the RBA to switch lenders if their bank doesn’t pass on the latest cash rate cut.

The Reserve Bank of Australia (RBA) delivered mortgage holders and business operators a Melbourne Cup Day win by cutting the official cash rate by 15 basis points to a new record low of 0.10%.

Better yet, the RBA board says it’s “not expecting to increase the cash rate for at least three years”.

However, there are concerns that not all the banks will pass the rate cut on to borrowers across all of their products.

For example, within 24 hours of the RBA rate cut several of the big banks announced cuts to their fixed rates and business rates, but not their variable rates.

RBA Governor Philip Lowe says if the banks don’t lower their standard variable rates, “ask them for a better deal”.

“And if they don’t give it to you, switch to a bank that will,” Governor Lowe adds.

Federal Treasurer Josh Frydenberg is also urging lenders to pass on the RBA rate cut to reduce the cost of borrowing for households and small businesses.

“It’s my expectation that the banks will now look for ways to pass on those rate cuts. Pass it on to small businesses and pass it on to mortgage holders,” he says.

How we can help you play hardball

Now, here’s the important part.

It’s all well and good for our nation’s leaders to urge the banks to pass rate cuts on to you, but whether or not your lender will actually do so is another matter altogether.

The good news is, the power is with you – the borrower. And we can help you harness that power.

That’s because competition amongst lenders is fierce right now, so if your lender won’t budge, there’s a good chance another lender will.

We’re keeping a keen eye on which lenders are passing the rate cut on to their customers, and which lenders aren’t.

So if you’re keen to explore your options during this time of record-low interest rates, get in touch today.

We’d love to help you pay less interest on your mortgage each month.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.