COVID-19 Impact: What Should A Home Loan Borrower Do In Case Of Job Loss?

All our financial investments are made assuming normalcy will prevail. However, one cannot be certain about what the future holds. Before December 2019, for instance, nobody expected that a pandemic such as the Coronavirus would unfold, causing unprecedented human and economical damages.

Many of us are totally dependent on our monthly salaries, to pay off one's loans. What if you end up losing your job, because the sector in which you work is not performing well and your company is laying off people to cut costs? This may happen in India's information technology sector, for example, as it grapples with new challenges amid the second wave of the COVID-19 pandemic.

In case of such an unforeseen event, you might not be able to discharge your financial obligations, at least for the time being. It would still be easier to make adjustments in case of loans of small amounts, such as automobile loans. However, borrowers of home loans, which are often large in size, might find it difficult to pay the EMIs in case of a sudden job loss.

How should you prepare yourself for a situation such as that?

Set up an emergency fund

As the old adage goes, prevention is better than cure. The many benefits that come along with private jobs are uncertain in nature. You may earn big bucks at one point and lose employment at another. This is why those with a private job must start building a contingency fund right from the beginning. While this fund may not solve all your problems, it will surely work as your savior till you find employment. 

Keep loan amount low

Also, the nature of your job is another reason why you should keep your home loan amount as light as possible. Your monthly salary and credit score can get you a loan of up to Rs 50 lakh. But, for the sake of financial prudence, try to keep it to Rs 30 lakh, if you can.

Plan prepayment

Another precautionary measure is to focus on prepaying your loan. While there may be charges involved, it is only wise to lessen your financial burden as and when you can. On your own, you may be able to handle tough times without much ado; in case you owe money to a bank which charges an interest on the amount, things will be more difficult to handle.

Watch your home insurance plan

While taking a home insurance policy, do get a clause inserted under which the insurance provider will cover you in case of a job loss owing to health reasons. You may have to pay extra to get the clause added but it would be worth the cover.

What to do during hard times?

You would have done so many things differently if only you had seen this coming. However, the fact of the matter is you did not prepare yourself for this day. And, under no circumstances, you are ready to lose your property. What can you do now?

Utilise severance package 

Your company will offer you a severance package that can help your survive for some months. But, that is all you have got for present. It is imperative you use this money very frugally. Cut costs at all possible junctures to make this money last longer.

Seek help from friends

What is true of for all the situations holds true here, too. Your family and the friends should be your first fallback option. Try to take a personal loan from them to go on till you find a new job. 

Use PF money

While expert advise against it, you could also withdraw you provident fund money in case of an emergency. By the very definition, an emergency requires your immediate attention. You could start replenishing your retirement fund at a later stage when you are comfortable doing that.

Liquidate assets

Another option is to liquidate some of your assets. This could include your automobile, furniture, gadgets or jewellery. The money earned through liquidating these assets might not last long, but it would certainly provide you temporary relief.

While managing all this, put the best of your efforts to find a new employment. You could also opt for part-time jobs suitable for your skill set to make ends meet till you find full-time employment.

Also Read: A Guide To Get Home Loan Against Property