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Pay Cut or Job Loss Amid Covid-19? Quick Tips to Manage your Savings, Money

Debt funds, fixed-income investments in recurring deposits, or fixed deposits that don’t have any important financial goal can be redeemed

Debt funds, fixed-income investments in recurring deposits, or fixed deposits that don’t have any important financial goal can be redeemed

Fixed income investments, EPF corpus, Convert credit card dues into EMIs, and Relief measures under RBI’s resolution framework will help people who are facing job loss.

The Covid-19 pandemic followed by nationwide lockdown led to mass termination and pay cut leaving employees helpless. An unexpected turn of events has increased the plight of people, especially those who don’t have a well-prepared financial plan which factors such crisis. Here we bring you some options you can resort to sail through these adverse times.

People facing job loss –

Fixed income investments – Debt funds, fixed-income investments in recurring deposits, or fixed deposits that don’t have any important financial goal can be redeemed. As returns generated by such fixed-income investments are generally lower than the long-term returns. Though redeeming recurring deposits before they mature might attract prepayment penalty and would also bring the risk of capital erosion.

EPF corpus – To provide some relief and support to employees who are facing income disruptions, the government has allowed the EPF subscribers to redeem their allowance or 75 percent of their EPF balance for up to three months. But it is advised to opt for the EPF subscription only if existing fixed-income investments are not enough to rule out income disruptions. This is because withdrawing from EPF can affect post-retirement security.

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Convert credit card dues into EMIs - People having credit cards, who are unable to repay their dues, can convert their outstanding into EMIs. As compared to finance charges on unpaid credit card bills, the interest rate levied on such EMI conversions is much lower. The repayment of EMI conversions goes up to 5 years, allowing the cardholders to repay the total amount in small tranches depending on their financial capability.

Relief measures under RBI’s resolution framework – As a relief measure for existing borrowers, who have been hit by the Covid-19 pandemic, RBI introduced some guidelines. Individual borrowers, who did not avail loan restructuring schemes announced last year, have been allowed to take a one-time restructuring of their loans before September 30, this year. This scheme can be used by people, whose loan accounts have been classified as ‘standard’ on March 31, 2021. And have outstanding dues of Rs. 25 crores.

Emergency fund – The objective of an emergency fund is to meet crucial expenses arising due to job loss or other reasons including, illness. This fund should be able to meet the important or rather unavoidable expenses for at least 6 months. People who don’t have emergency funds should prioritise building one for future needs. This fund should be in high-yield saving accounts so that instant withdrawal is easy.

Loans – While approving loans, lenders bring into consideration the repayment capacity, job profile of the applicant. Due to the raging pandemic, banks and NBFCs have become very particular while granting loans. Therefore, people working in industries that have been adversely affected by COVID-19 will face severe challenges. One can consider gold loans, loans against property, and loans against securities to rule out financial shortfalls. Comparatively, lenders are more comfortable in granting these types of loans.

Adequate health insurance cover - The COVID-19 pandemic has highlighted the need of having adequate health insurance cover. One instant of hospitalisation can end the lifelong savings of an individual making it difficult to meet future expenses. People who are covered by an employer-provided group health cover should also purchase another health insurance policy.

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first published:July 04, 2021, 08:30 IST