Losing a job, whether voluntarily or involuntarily, can be stressful. This can come with an added pressure when you have pending debts or loans to settle.
So, what’s the way out?
Let’s discuss some of the practical ways to make your way back to financial security without downgrading your credit score in the UAE.
The most obvious one and something that every financial advisor ever has been advocating for years is – maintaining an emergency fund.
How much has it got to be? At least 6 months of your expenses.
This amount should include all your household expenses, along with your debt amount including the interest for each month.
Note: While certain emergencies can come unannounced, a grace period of at least 6 months along with a good health insurance can come as a temporary sigh of relief until you find a new job.
HELOC or home equity line of credit is a very affordable, flexible line of credit that lets you borrow against your house equity value and repay over a span of decades.
Commonly, the draw phase (where you can draw money against the equity value) can last up to 10 years. Post that, the balance locks and you have to repay the amount.
The interest rates are very low and repayments can also be postponed in certain situations.
Note: You can both withdraw and repay money during the draw phase, but once the draw phase is over, the remaining balance has to be repaid. The amount, period, and interest rates can vary from lender to lender.
Many times, banks offer helpful ways to unburden their customers in dire situations like job loss.
You may be allowed to skip a payment or two, restructure your loan payment, or decrease the interest rate to minimum, all without letting it affect your credit Score.
However, this entirely depends on your bank and their sole discretion.
While this is a very high risk method and may result in you falling behind in your debt cycle even more, it sure can be considered an option for those who are sure they will be back on a permanent income track in a fixed span.
Nevertheless, in case of a top up or backup loan, it is strongly advised to make sure you only apply for an amount that is absolutely necessary to pay off your current debts.
This lets you buy some more time and look for a suitable job while your credit score remains unaffected.
If you are not satisfied with your current career listings, you may opt for a temporary career reset that lets you create a stable income until you find something that you love.
It can be a freelancing job, a job in a smaller role, or a job very different from your regular profile. Apply for more and more jobs so your area of choice expands and you get into a regular income cycle ASAP.
Also, always try to build more than one source of regular income.
P.S - You can always switch whenever you want, but getting out of your debt cycle, especially if you don’t even have an emergency fund should be your top priority.
Last but not the least, if you have any assets, like a car, you can sell it out and repay your loan. Even if the loan is on the same vehicle, you can get a good amount altogether and always rebuild that asset later.
The only catch here is that since the value of assets like a car depreciates with time, you need to be ready with the residual amount that may be required to settle the loan debt in full once you sell it.
Written by - Tashika Chopra