Lost your job? Here’s 4 tips to manage your finances
Managing money is always important , but it becomes essential during the pandemic outbreak. We are starting to see some major economic consequences already, but what is less visible is the financial-induced stress caused by the uncertainty. As many people lost their jobs, the security of a regular income has caused a strain on daily life requirements. It is worse if the individual has recently made large or multiple long-term investments. Hence it becomes necessary to budget your expenses and become financially resilient during these times.
- If You Took A Term Insurance Policy
An insurance policy is one of the best investment options if you bought a life insurance investment recently and the lockdown has made you lose your job. You will want to close your insurance plan, this needs to be done immediately as insurance companies allow a 15-day free-look period, during which the buyer can return the insurance policy with only minor deductions. You might also be offered an extension of the free-look period to 30 days. For some reason, if that option is not available for you, then you will simply have to keep the policy and hope for things to improve on the job front by the time the next premium is due in the following year. If your financial conditions do not seem to improve, you will have to close the policy.
- If You Took A ULIP
Unit linked insurance plan is a great tax saving option in India. It has an element of savings incorporated in them, this means that the premium is invested by the insurance company in different funds to provide a maturity benefit. Non-payment of ULIPS premium leads to discontinuation of the policy. The corpus goes into a discontinuation fund and earns 4 per cent before it is returned to the policy buyer at the end of the five-year lock-in period. ULIPs have a lock-in period of 5 years but investors can surrender the fund even before the completion of tenure, however, the surrender value incurred is paid only at the end of the 5-year term.
- If You Bought A Real Estate
The current pandemic situation has led to job losses and pay cuts, many home buyers and loan customers may want to change their plans now. Unfortunately, people investing in real estate have to bear a very high entry and exit cost. Homebuyers pay almost 5-6 per cent of the value of the property as stamp duty and registration charges. To get out of the real estate deal, they still have to bear this loss. Besides, selling a property requires time and cannot be done in a hurry. Real estate has been a buyer’s market for several years now and the pandemic outbreak has only made things difficult for sellers. It is even worse for individuals who opt for a loan to buy a property; the loan has to be closed before the property could be sold-off. The situation can get easier only if the new buyer is willing to pay off the home loan. 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 Vehicle With The Loan
A vehicle is considered a smaller purchase compared to other options like a home or property. But, the vehicle owner will have to suffer a loss if he wishes to get out of the deal due to a change in his financial situation. There are certain fixed costs on a loan taken for a car, including the file processing charges and documentation fees. Also, the owner will be charged with a prepayment penalty since he has to foreclose the loan and get the bank hypothecation vacated before he sells the vehicle. However, keep in mind that foreclosing a car loan can affect your CIBIL Score.