How to Handle EMIs After Losing Your Job: 12 Practical Tips

How to Handle EMIs After Losing Your Job: 12 Practical Tips

Losing your job can be an incredibly stressful and challenging life event. One of the biggest financial concerns is figuring out how to continue managing equated monthly installments (EMIs) on loans and credit accounts during this uncertain period.


When your income suddenly drops or disappears, keeping up with EMIs for mortgages, car loans, personal loans, and credit cards can seem daunting or impossible. However, with some proactive planning and strategic money management, you can responsibly handle your obligations.

Here are 12 practical tips to guide you:

Immediate Action Steps

1. Inform Your Lenders

The first step is to contact all your lenders and explain that you have lost your primary source of income. Being upfront from the beginning is key – don’t hide the situation or default on payments before notifying them.

Provide details on your job loss, and discuss how you plan to continue making upcoming payments. Ask about hardship assistance programs or temporary arrangements like reduced payments.

This opens the lines of communication to work out solutions. While uncomfortable, honest conversations lay the groundwork for navigating this together.

2. Review Your Finances

Compile a current household budget detailing:

  • Income: Any severance package, remaining salary/PTO payout, spouse’s income, unemployment benefits.
  • Assets: Emergency and other savings that could be utilized if necessary.
  • Expenses: Fixed living costs like mortgage/rent, utilities, food, healthcare, and other essential bills.

This clear picture of your financial situation will help guide discussions with lenders when proposing repayment arrangements that work within your constraints. Share details to demonstrate good faith efforts.

Negotiation and Relief Options

3. Request Loan Restructuring

Based on your current budget, propose restructured payment terms that create more manageable EMIs over the next few months as you get back on your feet. Things to request:

  • Lower interest rate to reduce monthly payments
  • Extended loan length so payments are spread over additional months
  • Temporary reduction in EMI amount for a defined period
  • Permission to pay interest only rather than full EMIs for a few months

Most lenders want to retain customers and avoid defaults, so they’ll try to accommodate reasonable requests. Persist politely through multiple calls if needed.

4. Explore Balance Transfers

If your credit score is good (650+), research balance transfer credit cards offering 0% intro APR for a 6-18 month period. Transferring outstanding balances to these cards defers interest for the intro period.

However, factor in balance transfer fees of 3-5%. Make sure you can pay off the balances during the intro rate window. Have a plan before transferring to avoid deeper debt.

5. Make Smaller Payments

If loan restructuring is not an option, discuss making reduced payments each month. This demonstrates good faith while providing cash flow relief. Yes, late fees, more interest accrual, and credit score impacts could occur – but defaulting is worse.

Once reemployed, you can potentially negotiate to reverse some fees or penalties since you notified them upfront. Retain documentation for these discussions.

Tap Available Resources

6. Leverage Severance Funds

If you received a severance package, use it strategically to cover as many upcoming living costs and EMIs as possible while job hunting. This temporary cushion makes it less urgent to find immediate income.

Prioritize expenses wisely. For example, pay essential bills and minimum payments on all accounts to delay defaults or derogatory marks.

7. Utilize Emergency Savings

With no income, this is the exact scenario an emergency fund is designed for. Avoid touching it if possible, but don’t let pride stop you either.

Withdraw only what is truly needed, and replenish it as a top priority once reemployed. Even a small emergency fund buys you time and options.

8. Research Government Assistance Programs

Explore whether government programs could provide income sources or financial aid:

  • Unemployment benefits – provides weekly income for up to 26 weeks
  • COBRA – retain employer health insurance temporarily
  • Food stamps – supplement grocery costs
  • Medicaid – provides health insurance if income is very low
  • Mortgage/rental assistance – helps avoid eviction

These programs offer support until you regain your financial footing.

Additional Strategies

9. Reduce Discretionary Expenses

Cut down non-essential spending in areas like dining out, entertainment, travel, subscriptions, and hobbies. Avoid new clothing, electronics, or other purchases. Every dollar saved helps cover priorities.

Look for ways to lower recurring bills for internet service, cell phone plans, cable packages, insurance policies, gym memberships, etc.

10. Earn Side Income

Consider freelance work, contract gigs, or part-time jobs in the interim to generate cash flow:

  • Food delivery services like Instacart or DoorDash
  • Ridesharing like Lyft or Uber
  • Tutoring, music lessons, pet care, or other local services
  • Selling handmade crafts or goods online through Etsy or eBay
  • Renting out a room on Airbnb

Multiple income streams, even small ones, make a difference.

11. Seek Community Support

Don’t isolate yourself. Confide in close friends and family and ask for emotional support or financial assistance if able. Surround yourself with positive people to stay encouraged.

Seek free financial guidance from non-profit credit counseling agencies. They can help negotiate with lenders and develop debt management plans.

12. Maintain Good Credit

Despite the hardship, do everything possible to make at least the minimum monthly payments on your EMIs. This protects your credit score to qualify for the best loan rates after reemployment.

Late payments hurt your score, but defaults hurt even more. If needed, pay smaller amounts consistently.

Final Thoughts

Losing a job and managing debt is tough emotionally and financially. But stays positive, be proactive, and take it one day at a time. Your situation is likely temporary with diligence, adaptation, and support.

Many others have successfully navigated job loss. With prudent budgeting, wise use of resources, open communication, and prudent financial behaviors, you can minimize the impact and get back on track.


Coping with job loss while continuing to manage obligations like EMIs requires both short-term relief strategies and long-term diligence. Notifying lenders quickly, renegotiating terms, tapping savings, reducing expenses, finding supplemental income, and seeking support provide stability. Maintaining positive momentum by making minimum payments shows good faith. With patience and perseverance, you can sensitively handle EMIs during challenging times and emerge in sound financial standing.


Should I use my retirement savings to cover EMIs?

Avoid raiding retirement funds if at all possible – you’ll lose growth and pay penalties. Only use this as an absolute last resort if basic living expenses are at risk.

If I can only pay 50% of my EMI, is that better than defaulting?

Yes, making partial payments shows good intent and minimizes additional fees or credit damage. Discuss this option with lenders if needed while getting back on your feet.

Which debts should take priority for payments if money is very tight?

Prioritize secured debts like home, auto, and education loans. Defaulting has worse consequences like repossession or foreclosure. Pay minimums on all accounts if possible.

Should I cancel credit cards I am no longer using?

Avoid closing unused cards as total available credit factors into your utilization ratio. Suspend usage but keep accounts open.

How long do I have to inform lenders and negotiate options after job loss?

Contact all lenders immediately after job loss, preferably before the first payment is due. This provides most time for assistance programs and arrangements.




Leave a Comment