Job losses can be disturbing. The situation worsens if one is already burdened with loans, especially unsecured ones like personal loans. Personal loans can be a useful financial tool to meet various needs, from funding emergencies to consolidating debt. However, when faced with unemployment, repaying a personal loan can become challenging. In such a situation it becomes imperative to consider different personal loan repayment options.
However, it is only a temporary situation, and it is important to take proactive steps and explore available options to manage loan repayments effectively. Even though it is stressful to think about paying off a loan, it is time to act smartly and figure out ways to deal with the situation. Here, are ten strategies to repay a personal loan when faced with a job loss.
Tips to Repay Personal Loans When Unemployed
Here are some of the best tips to consider when repaying a personal loan when unemployed:
1. Inform the Lender:
What happens if a personal loan is not paid? The lender is well within their rights to take legal action when a certain number of days have passed. Hence, informing the lender about the change in employment status is the first step. This will help establish open communication and potentially lead to finding a mutually beneficial solution.
Lenders may have specific policies or assistance programs for borrowers facing financial difficulties. Informing the lender will open the doors for these policies and programs that can come as a great relief to one's current situation.
2. Explore Loan Restructuring:
Loan restructuring means revising the existing terms and conditions of the loan. Discuss the possibility of loan restructuring with one's lender. This could involve extending the loan tenure or reducing the monthly instalments to make them more manageable.
Restructuring can provide temporary relief and enable one to continue making regular payments until a new job is secured. This will ensure that EMI payments are not skipped as CIBIL scores automatically lower when one doesn't pay personal loan EMIs.
3. Review the Loan Agreement:
Carefully review the terms and conditions of the loan agreement. Look for any provisions related to job loss or financial hardships. Some agreements may offer provisions for temporary suspension of payments or reduced interest rates during challenging periods.
Become familiar with these options and explore if they apply to one's situation. If any term or condition seems helpful, contact the lender to benefit from such terms.
4. Defer EMIs or Loans that are Not Urgent:
Hardships can increase with the stress of multiple loan repayment obligations. Repaying all the loans can be utterly difficult when one's income has dived. In case of multiple loans or EMIs to repay, prioritise them based on urgency and interest rates. Contact each lender individually and explain the circumstances. In some cases, lenders may allow payments to be deferred temporarily or may provide alternative repayment options.
5. Liquidate Investments:
This should be considered as a last resort. If repayment is impossible by alternate means, consider liquidating non-essential investments to generate funds for loan repayments. Evaluate the portfolio and identify assets that can be easily converted into cash without incurring significant losses. However, it is advantageous to consult a financial advisor before making any major decisions to ensure one makes informed choices.
6. Review the Monthly Budget:
Revisit the budget for monthly expenditures and identify areas where expenses can be reduced. Trim unnecessary expenses such as dining out, entertainment subscriptions or luxury purchases. Redirect the saved funds toward loan repayments.
Additionally, explore ways to increase the monthly income. This can include freelancing or part-time work that will help bridge the financial gap. The extra income earned can be re-routed to repay the personal loan EMIs. This will also guarantee that one's finances are not stretched too thin.
7. Explore Schemes of Financial Assistance:
Research government or non-profit schemes that provide financial assistance to individuals facing unemployment or financial hardship. These programs may offer temporary relief through grants, low-interest loans or job placement services. Explore all available options to alleviate the financial burden.
8. Seek Help from a Financial Advisor:
A financial advisor can provide valuable guidance on managing one's finances when unemployed. They can help create a personalised repayment plan, explore alternative options and provide insights on debt management strategies. A financial advisor can also assist in navigating complex financial matters and making market-informed decisions.
9. Consider Balance Transfer:
A balance transfer involves transferring an outstanding loan balance to a new lender. For people with good credit scores, consider transferring the personal loan balance to a new lender offering lower interest rates and better terms. This will help reduce their monthly payments and overall interest burden, making it easier to manage their loan repayments during unemployment.
10. Avail Loans Against Assets:
Explore the option of availing loans against assets. This can include gold loans or loans against fixed deposits. These loans typically require only interest payments and not EMIs, providing temporary relief until the restoration of financial stability. However, carefully consider the terms and repayment obligations associated with such loans.
In a Nutshell
Job loss can create financial stress, especially when one has personal loans to repay. By adopting proactive measures and exploring available options, one can effectively manage loan repayments during this challenging period. Navigate through this difficult phase and successfully repay one's personal loan by implementing the above steps and considering personal loan repayment options.
Avoid unnecessary stress by selecting the right lender at the time of availing of the personal loan. TATA Capital is one of the most preferred lenders for personal loans. With affordable interest rates, flexible repayment terms and quick disbursal, TATA Capital provides some of the best terms for personal loans. It also extends personal loans for the unemployed based on satisfaction of certain criteria.
04 March 2024
5 mins read
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