Losing a job and a loan – guide for the borrower
We live in a time when work is easier to lose than to get. The specter of losing income can effectively spend sleep nights, especially for borrowers. What options do we have when the boss hands in dismissal and the loan is still hanging overhead? If you fail to find a new job quickly, will you run into financial problems or will you be able to get out of it somehow? Learn how to handle this situation.
Remember – you are not alone with this
To get a loan, all you have to do is prove your creditworthiness. It is not that easy to pay the debt – especially if we lose our source of income or other professional problems arise in our lives. Losing a job is always a problem, but it turns out to be the biggest blow when it prevents us from paying off the loan installment. Although it seems that we are alone with this problem, banks are really trying to get their clients on hand. In the end, they also care about paying their debts rather than driving borrowers into larger and larger debts. Whatever happens, remember to remain calm. If you haven’t made a commitment yet, keep it cool. It is best to be aware of a possible job loss as soon as you take out your mortgage!
Before taking a loan
- Think forward. An example would be mortgages taken in francs. Although the installments seemed temptingly low, the foreign currency became more expensive and the rate fired so hard that thousands of borrowers were in huge trouble. A mistake has already been made here at the planning level. Those who took out the loan in francs took it in a different currency than they earned and ignored the potential threat. The same risk may be illness or job loss. In order not to overdo it, you should be able to limit your income on the back of your mind. It is better not to set the repayment period or the amount of the monthly installment at the maximum level allowed by the bank, and instead leave yourself a safe margin.
- 2. Build a financial cushion. Before you buy a mortgage flat, take some time to consistently save. Try to save not only for your own contribution, but also for the so-called financial security cushion. Let it amount to approximately as much as you earn for half a year or at least several months. This amount will allow you to survive the period of unemployment without much worry about current expenses and loan installments.
3. Consider matching your job loss insurance. Of course, this can only be done before you commit, and certainly before you lose your job. Such insurance is usually optional, which is why hardly anyone chooses it. However, when you lose your job, it may not be salutary for us. When we provide appropriate confirmation in the bank, the insurer will take over the repayment of the mortgage for a fixed period, e.g. throughout the year.
Once you have credit
1. Stay in touch with the bank. Only when you avoid him will you bring yourself real problems. Unfortunately, in adult life, especially when it comes to finances, sweeping things under the rug is no method – unless you are arranged to terminate the contract by the bank and step into the bailiff’s action. As soon as you learn about the dismissal and begin to sense that the repayment of the thread installment, immediately go to the bank. An honest conversation will definitely have a better effect than no response. The worst thing you can do is break the contact – stop answering calls and ignore payment requests. Doing so will only multiply the costs: you will have to add interest to the amount of debt, and over time, and the price of the enforcement proceedings.
2. Negotiate. If you have not been insured against losing your job, unemployment does not have to ruin you. When you stay in touch with the bank, you’ll open a field for negotiation. Pursuant to the amended act, the bank has a legal obligation to assist the borrower in repaying the liability. The options that remain in the game when you have problems paying off mortgage installments include:
a) extending the loan period – such a maneuver will automatically lower the installment amount. The only minus is the extension of the commitment for another year. However, if you get a new job, you’ll be able to overpay your credit and get back to your original plan. However, this option is out of the question if the loan was taken out for the maximum period;
b) credit holidays – i.e. suspension of installment repayment for a specified period, e.g. several months. The annex to the contract should be prepared before the due date of the problematic installment. Banks are not obliged to agree to such an option, but usually they agree to it. This involves extending the loan period or increasing the loan installment. Suspension of repayment may concern the entire installment or the capital itself (in which case you must still pay the interest only);
c) loan consolidation- i.e. joining several loans into one liability, and at the same time harmonizing its conditions, including the interest rate. Most often this is associated with the extension of the repayment period, however, it reduces the cost of servicing loans. First of all, be careful not to fall into a spiral of debts – beware of temporary and uncertain solutions, such as payday loans and installment loans for the unemployed.
3. When all fails – sell the property. If none of the above options to cope with the problem will not work, all you have to do is sell the flat for which you took out a mortgage . Losing your job, however, does not have to lead to such desperate steps – if you stay in touch with the bank, you will not have delays in paying installments on your conscience and you will show your will to cooperate, most likely you will not be forced to do so. Although such a solution is a last resort, it is still better to move to a smaller and worse apartment. than let the bailiff take over his place. After the amendment to the act, it is the debtor, not the creditor, who finds a buyer – it is beneficial because you can try to negotiate a better price and thus free yourself from oppression.