Many people have loans. Borrowers take them often and hope that they will be able to repay the debt. But this does not always work out – problems can arise.  What to do if the loan is necessary? And it is not possible to refuse it. The situation is not so complicated, there are scenarios that will help you. So you can take a loan and not be afraid of negative consequences that will not allow you to repay the debt. For example, prolonged illness and disability, reduced income or being laid off.

Due to job loss, you may be temporarily left without money. The situation is more complicated if you have a loan. Let’s find out what to do in this situation.

What to do with a loan when you don’t have a job

There are several options for solving the issue of credit when there is no job and other sources of income. Let’s look at each of them.

Use insurance

Banks often offer to buy a job loss insurance policy with the loan. If you paid for it, you can use it. To do this, you need to contact the bank’s support.

Each insurance company or bank determines the situations in which a benefit is payable. Usually, an insured event is the loss of a job in the following cases:

• redundancy;
• closure of the organisation;
• dismissal due to a change of ownership;
• dismissal in a situation that was beyond the control of the employer or the employee. For example: an employee has been taken on compulsory military service or a previous employee has left maternity leave.

That is, if you quit your job at will or were dismissed for breach of discipline, you will not be able to use the insurance.

Apply to the bank for restructuring

Banks can renegotiate the terms of the contract to make it easier for you to make payments – this is restructuring. It is granted only in difficult life situations that you can prove with documents. This includes the loss of a job. If the bank approves restructuring, the term of your loan will be extended and your payments will be lower. But in this case the overpayment will increase.

Restructuring is also reflected in your credit history. However, when considering applications, banks still perceive it better than overdue payments. 

File for bankruptcy

Bankruptcy is the most extreme option when you can’t find a job for a long time. There are no other options to pay your debts: you can’t sell property or borrow money from people you know.

Bankruptcy will limit your outgoings, future loans and management activities. If possible, bankruptcy should still be avoided.

Take a credit holiday

A credit holiday is a grace period during which you can choose not to repay your loan. The holidays are granted for a period of 1 to 6 months. The terms are prescribed by law and are the same in all banks. The rate on the loan does not change, but the term increases. What you did not pay during the holidays must be paid afterwards. To apply for a holiday, you need to apply to the bank with documents that confirm a reduction or loss of income.