Most of the companies are not able to survive the hit of COVID19, and as a result, they had to lay off their employees. Not all of you are lucky enough to have your job stable during the lockdown. Since this has become a global issue, it isn’t easy to land a new job unless the lockdown is lifted. It raises a question how you will manage your debt repayments.
As you have lost your job, you will turn to savings for your livelihood. If you have at least three-month worth of savings, you can easily manage to live off your savings for a couple of months provided you cut down on your savings. Since you have outstanding debts, it will be harder to keep up with repayments with each passing day, but you can tackle this situation easily. Here is how you can manage it.
Create a budget
First off, you need to create a budget to estimate how much room it provides to you. Since your living style will change after losing the job, you will have to recreate your budget. Look over your previous budget to get an idea of total monthly expenses you incur.
Figure out what costs you can cut down or you no longer need to make, for instance, travel expenses. Since you are unemployed and you have been living under a lockdown period, you should live frugally. This time you will be spending on essential items like food, utilities, and the like.
The money you save by cutting back on discretionary expenses can go toward debt repayments.
Find out debt repayment ways
If you are still in the red, you should figure out which debts you should repay first. For instance, you may have several outstanding debts at a time like a mortgage, credit card bills, and loans repayment. Since the mortgage carries higher interest rate than rest of the debts, you should give it a priority. However, debt repayment seems to be harder when you lose your job.
Unemployment hits your financial condition so badly that you start to rely on no guarantor loans for unemployed for your livelihood. During such circumstances, it is recommended that you talk to a debt management company to help you with making a repayment plan based on the interest burden.
Repayment of higher interest debt should be as early as possible as they add up the cost of the loan. However, sometimes the amount of debt is so high that you cannot manage to keep up with all high-interest debts.
In this situation, you should talk to your lender. Your lender may allow you to avail a moratorium period for a limited time. This will ease the burden of repayments. However, do not forget that you cannot escape your financial obligation.
A moratorium period puts off your debt like mortgage repayments for a short period. Once this duration expires, you will end up repaying slightly higher monthly instalments. Further, the lender will reevaluate your financial circumstances to decide if you can pay off the debt and accordingly frame the repayment size.
If you enrol for a moratorium period, interest will keep accruing. Therefore, make sure that you carefully consider your financial condition before choosing this option.
If you do not want to avail this option or your lender does not allow you to have this scheme, you should make the minimum repayment. As long as you have a job or an income source, you can quickly reimburse your debt outright, but when you are unemployed, you will end up rolling over a loan. If you keep paying the minimum amount, you can ease the burden of debt repayments. However, interest will keep accruing on the outstanding balance.
You lender can also offer another repayment plan after analysing your financial condition. Since you have lost your job due to COVID19 pandemic, lenders can provide you with a better and more affordable plan bearing the guidelines of FCA.
Temporarily and permanent redundant schemes
If you have been temporarily laid off, you can apply for statutory lay-off pay. You will be entitled to get £29 every day provided you meet all terms and conditions. If you have been made redundant permanently, you are entitled to redundancy pay. However, you will have to meet certain requirements.
Managing debts during lockdown is undoubtedly tricky, but it is not impossible at all. It would be best if you are smart with your expenses. Try to create a budget, cut back on costs and apply for redundant schemes to have some cash flowing in. If you talk to your lender, they will help you by offering another affordable repayment plan.