Lost your job? Here are 4 steps to keep up with your financial commitments

These steps help you service home loans, vehicle EMIs, insurance premiums and investments

The lockdown has hit bottom-lines so badly that corporate India is slashing jobs to remain afloat. Job losses and salary cuts have become so widespread that such news reports no longer make it to the front pages of newspapers.

Losing your job and the security of a regular income can turn your world upside down. It is worse if the individual has recently made a large financial commitment such as a big-ticket purchase or an insurance policy.

Here are a few steps that can help mitigate the problems before they turn overwhelming.

If you bought real estate with a loan:

Due to job losses and pay cuts, many home buyers and loan customers may want to change their plans now. Unfortunately, real estate has very high entry and exit costs. Buyers pay almost 5-6 per cent of the value of the property as stamp duty and registration charges. Even if they want to get out, they still have to bear this loss.

It gets worse for a person who has taken a loan for the purchase. He will have to close the loan before he could sell the property. It’s a tad easier if the new buyer is willing to pay off the home loan. This will depend on whether the buyer is taking a loan or using his own savings for the purchase. In case he is also taking a loan, the owner will have to take a bridge loan to close his home loan before he sells the property.

If you bought a car with a loan:

Compared to a house, a vehicle is a smaller purchase. But, the owner will have to suffer a loss if he wants to get out of the deal due to a change in his financial situation. As everybody knows, a car loses 15 per cent of its value the minute it rolls out of the showroom. There are also certain fixed costs on a loan, including the file processing charges and documentation fees. Also, the owner will have to shell out a prepayment penalty since he has to foreclose the loan and get the bank hypothecation vacated before he sells the vehicle. Though the prepayment charge is only 1-2 per cent of the outstanding amount, keep in mind that foreclosing a car loan can affect your credit score.

If you took a large insurance policy:

An insurance policy is a great investment, but not if you are jobless. If you bought an insurance policy recently and want to close it now, you need to act immediately. Insurance companies allow a 15-day free-look period, during which the buyer can return the policy with only minor deductions...

The article was first published by MoneyControlDOTCom

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