When you are hit with unemployment, it is extremely essential to take every step with caution. Failing to make the right moves can lead to credit card debt default and a badly damaged credit score, but the good news is if you make the right moves, you can avoid the worst financial damage. While managing your credit card debt is one of the foremost steps, you can also use your credit card in other ways to handle the situation well. So, here are 10 ways through which you can manage living in UAE even if you are unemployed:
Credit Card Debt & Job Loss
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Communicate with your credit card issuers
If you realize you might not be able to make the minimum payment on your credit card, call your issuer. The sooner you do this, the better. Many issuers agree to reduce your interest rates or minimum payments of those facing short-term money challenges because of Covid-19, family emergency or a pay cut. If you’ve already fallen behind and accrued late fees, request that those fees be waived. You can even ask for forbearance, which is a temporary hiatus from paying your bill. But if you wait until your account is already in default, you could limit what types of relief you’re eligible for.
Keep your cash
It is true that paying just the minimum isn’t a good long-term plan. If you pay only the minimum, it could take decades to eliminate your balances entirely, even if you do not add any new purchases.
But when you are in survival mode, paying only the minimum is perfectly fine if it frees up cash for unexpected expenses and certain must-pay bills such as rent, mortgage or car payments. In such uncertain times, having cash on hand is far more important than minimizing long-term credit card interest charges.
Avoid adding to your Credit Card debt
It may be tempting to use credit cards to pay for essentials when you are not earning income. But dealing with an unexpected period of unemployment is an example of why it is so important to maintain an emergency fund. If you have cash saved, use those reserves to pay bills instead of adding to high-interest credit card debt, which will be even harder to pay off later on. If you do not have an emergency fund and can’t afford to pay for essentials, such as housing, during this time, consider taking out a personal loan. Borrow the smallest amount that you need to cover expenses during unemployment so that repaying the loan does not add to your financial stress later on.
Find out if you qualify for unemployment insurance cover
If you do not have money coming in, paying even the minimum on your credit cards can feel impossible. But the math might change if you have taken a unemployment / credit shield insurance and you qualify for unemployment benefits for few months., With unemployment, for example,major credit card companies do take unemployment insurance cover and its benefits can of few months minimum amount due payment on your behalf, if you lost your job through no fault of your own. Check with your bank
Create a monthly budget and prioritize expenses
When you develop or revise your budget, divide expenses into mandatory and discretionary categories. Mandatory expenses, which include housing, food, utility payments, can’t be avoided. Many discretionary ones, like dining out and attending movies, concerts, or sporting events, can and should be cut. Other discretionary expenses, including telecommunications connections, car payments, and Life insurance, can either be eliminated temporarily or cutback for a while.
Check for low-interest offers on other credit cards you have
When you are unemployed, getting a new credit card is not an option. Even with good or excellent credit, it is hard to qualify for one if you have a low reported income or a heavy debt load. And with no reported income, it is impossible to qualify. So, instead of applying for a new card to lower your interest charges, take stock of the offers to which you already have access on your existing credit cards, avail balance transfer facilities to reduce your interest and monthly payments, It will also give you relief for one month or so from your monthly payment due to the process or transfer.
Work with a credit counselor
If budgeting and identifying strategies to deal with debt become overwhelming on your own or you are already in default, seek out help from a reputable credit counselor. Credit counseling agencies will negotiate to your banks on your behalf and also offer debt management plans.
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Keep making minimum due payments
You should aim to continue making minimum payments on your credit cards and loans even when you are unemployed. That way, you will protect your credit score, which you are going to need to keep strong to get credit at competitive interest rates in the future. Since payment history is the most important factor in your credit score, a series of missed or late payments can have a negative impact on it. Consider minimum credit card and loan payments to be a necessary expense, like food and housing, when you create your budget.
Ask for Credit Card Debt Settlement / hardship programs
Seeking this kind of relief is typically a last resort, but worth considering if you are not able to make the minimum payment. Banks & Credit Card issuers will be willing to lower your required minimum monthly payment and offer you a debt settlement plan, if they think it will stop you from defaulting.
Be aware that entering a settlement agreement probably will be entered in your credit history and likely will lower your credit score.
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It is understandable if you feel anxious, confused, and isolated when you’re in debt and unemployed. But help is out there. Start with your creditors and then, move on to self-help strategies like budgeting. Finally, seek assistance from trustworthy experts. This period of time will likely be temporary. Keep in mind that any strategies you use to handle debt should keep your finances as healthy as possible in the long term.-
