5 ways to protect your home if you are facing retrenchment
Unemployment in South Africa recently rose to around 29%, with large companies in sectors ranging from banking to mining, media and construction announcing job shedding.
Standard Bank, Absa, Alexkor, MultiChoice, Tongaat Hulett, Impala Platinum, Sibanye-Stillwater, Tiso Blackstar and others have all made headlines for large-scale job losses – some running into the thousands.
Petrie Marx, Product Actuary at Sanlam, offers tips to mitigate the financial risks if you find yourself facing retrenchment.
1. Credit life cover
"One of the best ways to protect you and your loved ones when taking out a loan is to invest in credit life cover," Marx says. "Usually, it’ll be offered to you by the credit provider on the back of the loan you’ve applied for. It protects you in two primary ways.
Firstly, your lifestyle is protected as the credit provider will not lay claim on the asset that was financed, e.g. your family’s home in the case of a mortgage agreement. But secondly, and even for unsecured loans, it won’t leave you, your loved ones, or your estate, with debts that still need to be paid off should you be permanently unable to repay the loan as a result of unexpected death or disability."
The credit provider will not lay claim on the asset financed, e.g. your home in the case of a mortgage, explains Marx. Secondly, in the case of even unsecured loans, you and your loved ones won't be left with debts that still need to be paid off if you are left permanently unable to pay the loan in the event of death or disability.
In the case of retrenchment or temporary disability, the policy's minimum benefits must include servicing your loan instalments for a period of 12 months, says Marx.
2. Control debt levels
Ensure your overall repayments are under control at all times, but especially if the industry or business you work in is feeling the effects of slower economic activity, Marx advises. If you are facing a time of economic risk, don't be tempted to make more debt – control your budget more carefully than ever.
3. Be smart about the debt you do have
Guard against unnecessary loans, and first pay off your most expensive debts, such as credit cards and retail debts for clothing and furniture. Short-term debts tend to be the most expensive, while longer-term debts, such as home loans, tend to have more favourable interest rates. Compare what you are paying on your debts carefully to ensure you save the most money.
4. Have a reputable financial adviser on speed dial
It’s always best to speak to a financial adviser to ensure contingency plans are in place should curveballs hit, says Marx. Ensure you are going to someone reputable with a proven track record.
5. Save for a rainy day while you can
If you are fortunate enough to have a stable income, use the time well. While you are working and have the means to save, aim to have an emergency fund of at least six months’ salary, that you can call on in the case something adverse, like a retrenchment, happens unexpectedly.
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