Top News

Losing a job can be a major blow to anyone. It not only impacts your daily life, but if you're burdened with EMIs like a home loan, personal loan, or car loan, the situation becomes even more stressful. It's natural to feel anxious, but with the right information and smart planning, you can overcome this predicament. Let's explore five ways to manage your loan EMIs wisely even after losing your job.

1. Use an Emergency Fund

First and foremost, if you have an emergency fund, it's your biggest support. An emergency fund is the money you save to deal with sudden financial difficulties.

How does it work?
In general, experts recommend having an emergency fund equivalent to at least 3 to 6 months of daily expenses.

Suppose your total monthly EMI is ₹30,000 and your other expenses are ₹20,000. Your total monthly expenses are ₹50,000. If you have a fund for 3 months, you should have ₹1,50,000 (₹50,000 * 3).

Advantages
You get immediate financial relief.
Gives you stress-free time to find a new job.
You don't have to depend on someone else to pay your EMIs, which prevents your credit score from getting affected.

Disadvantages
If it takes a long time to find a job, the funds may be depleted.
If these funds are invested, you may have to liquidate them.

2. Talk to your bank or financial institution
Many people hesitate to talk to their bank after losing their job. But this is the most important step. Banks also don't want you to default, so they are often willing to work with you to find a solution.

What offers are available?
Moratorium
The bank may grant you a moratorium on EMI payments for a few months. This is a temporary relief during which you don't have to pay EMIs. However, interest continues to accrue on your loan during this time, which may slightly increase your total loan amount or extend the loan term.

Example
If your EMI is Rs. 20,000 and the bank grants a three-month moratorium, you won't have to pay EMIs for these three months. However, your EMIs will resume from the fourth month, and your loan term or total amount repaid may change slightly.

Loan Restructuring
This involves changing the terms of your loan. The bank may extend the loan term to reduce your EMI.

Example
If your personal loan is running for 5 years at an EMI of Rs. 20,000, the bank may extend it to 7 years, reducing your monthly EMI to Rs. 15,000. However, this may result in higher interest payments overall.

Reducing the Interest Rate
Under certain circumstances, the bank may temporarily reduce your interest rate, reducing your EMI. This typically occurs when the bank believes you will return to normal soon.

How to Apply?
Contact your bank immediately.
Be honest about your situation.
Provide proof of job loss (such as a termination letter) and information about your other sources of income.

Advantages
EMI burden may be reduced.
You can protect your credit score by avoiding default.
Banks can avoid legal action in case of default.

Disadvantages
A moratorium or extension may increase the total interest payable.
In some cases, loan restructuring may be reflected on your credit report, which could impact future loan applications.

3. Liquidate or mortgage your assets
If you don't have an emergency fund and aren't receiving significant assistance from your bank, liquidating or mortgaging some of your assets is an option.

Can you liquidate?

Gold: Gold is easily available for loan purposes, or it can be sold.

Shares or mutual funds: If you have investments, you can sell them to raise money. However, make this decision carefully before considering market conditions to avoid losses.

FD (Fixed Deposit): If you have an FD, you can break it and withdraw the money. This may incur some penalties.

Life Insurance Policy (if it has a cash value): Some endowment or ULIP policies have a cash value that you can use for a loan or surrender.

Can you mortgage?
Gold: Gold loans can be a good option, as they offer lower interest rates than personal loans.
Shares/Mutual Funds: You can take a loan against your securities.
Property: If you don't already have a home loan, you can take a Loan Against Property (LAP) against your property.

Advantages
Instant cash: You get the money immediately.
EMI Payment: You can pay your EMIs on time.

Disclaimer: This content has been sourced and edited from NDTV India. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.