Nowadays, it’s almost impossible to run into someone who isn’t paying off debt. Unless you’re still a child without any earnings, you might have some form of car loans, credit card payments, mortgages or more that you’re trying to pay off. While paying off debt can be hard, what are you going to do if you’ve suddenly lost your job? As your main and often times, only source of income, if you lost your job, you might be struggling to understand what to do.
Luckily, if you find yourself in this situation then know that you can pay off your debt without a job. It’s going to be exceedingly hard but it’s not impossible if you follow these steps:
Identify All Your Debts
The first thing you need to do is ensure that you identify your debts and then prioritize them accordingly. Just break them down into priority and non-priority debts on the basis of the consequences that non-payment would entail.
1. Priority Debts
Debts that fit under this category are the payments you need to make without fail. These could include your utility bills, taxes, rent, mortgage and more. If missing payment of anything means you’re going to face repossession of your house or loss of essential items such as gas or electricity, it’s a priority.
2. Non-Priority Debts
Debts that fit under this category are the payments such as bills for credit cards, banks, unsecured loans and more. Keep in mind that non-payment of these still has consequences but it’s not going to mean you lose your house.
Claim Any Insurance
When you’re working you might have signed up for various income protection plans. These are offered in order to allow you to have some sort of backup plan in case you end up losing your job. Based on your needs, you might need different forms of the following insurance active:
1. Mortgage Payment Protection Insurance (MPPI)
This can help you make your mortgage payment when you are unable to earn. However, this is available for a limited time period only.
2. Payment Protection Insurance (PPI)
Meant for credit card or loan payments, it will cover your payments for a time period, ranging from one to two years.
3. Short Term Income Protection (STIP)
Again, meant for a time period of one or two years, this insurance will help replace a certain portion of your income until you start earning again.
Keep in mind that in the past, these payment protection insurances were sold to buyers in an off-handed manner, meaning that you may have this insurance and not realize it. Discuss this with your lender and make a claim. If your claim for insurance is being refused, even if you have this cover, you can claim compensation.
Work Out an Emergency Budget
Once you’ve gotten your insurance activated, it’s time to work out an emergency budget. Cut back all unnecessary expenses. Live as frugally as possible, even with the insurance while you try to work out another viable means of generating an income.
Do not overlook the fact that these payment protection insurances are active for a limited time period. You have to make sure you can shoulder the weight of your expenses again once the coverage is gone.