Redundancy or loss of income

Redundancy, loss of overtime or even a temporary reduction in income can dramatically affect people financially and emotionally and can soon allow debts to mount up. There are a number of reasons why debts can occur in this situation, such as:

Being unable to make repayments on existing debts (e.g. credit cards and loans).
Not having money to pay for general living costs (food, mortgage/rent, travel costs etc).
Loss of income can cause depression and other related illnesses, which are often linked to poor financial management.

Experiencing a loss or reduction in income can make it impossible for the repayments to be met on unsecured and secured debts. Using credit to make repayments on existing debt is sometimes seen as the only solution but can often lead to the debts increasing. A common term used in this scenario is 'robbing Peter to pay Paul'; Payplan can help prevent this by providing free Debt Management Plans.

People who are made redundant and receive a redundancy settlement can use it to make a full and final settlement. This may clear all of the debt or just a proportion of it, either way it can make the situation more manageable and reduce the need to borrow more. See what Payplan can do for you if you are struggling to make the repayments on existing debts.

General living costs can also be affected dramatically if a loss of income is experienced. This can result in the need for credit cards, loans and overdrafts to pay for the basic costs of living. Failure to pay priority bills can have serious consequences, for example failing to pay a mortgage will result in mortgage arrears and can lead to house repossession. If you wish to avoid this then ensure you communicate with the mortgage company regularly. Alternatively, consider changing the terms of the mortgage by either making it an interest only mortgage or extending the repayment period (you will need to permission of the mortgage company to do this).

Loss of income or redundancy can often leave families with no alternative but to use the credit facilities available to them. In many cases this is the only way they can feed themselves and their family.

If you have recently been a victim of redundancy or have lost your income there are ways to help. Consider a benefits check-up or view our money saving tips section to help prevent debts accumulating.

You should seek advice as soon as your financial situation changes. Contact Payplan to see how we can help.

To find out more about Reasons for debt click here

Redundancy or loss of income

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