If you have recently lost your job, you might be stressed and anxious about how you will pay your mortgage or rent, council tax, utility bills, groceries and more. It’s completely understandable to feel this way – but what should you do next?
This post is dedicated to anyone who has recently lost their job and is worried they won’t be able to pay their bills.
Let’s crack on!
What happens if you lose your job and can’t pay bills?
Many individuals and families in the UK are living from payday to payday without significant savings, meaning if they are made redundant, they will not be able to pay their next set of household bills. You may be able to claim Universal Credit to access benefit payments quickly and stay afloat, but even these payments may not stretch far enough to cover all monthly payments for rent, energy, groceries etc.
If you suddenly stop paying your bills in full or on time, the creditor or company will send you a reminder to pay or get in touch to negotiate a more affordable payment plan on any arrears. It is worth discussing a monthly payment to avoid the company taking further action, including taken you to court.
Alternatively, it could be advantageous to use formal debt solutions, such as a Debt Relief Order or Individual Voluntary Arrangement. If you qualify for a debt solution, you could write off all or some of your debts.
How do you pay your bills if you lose your job?
When you have lost your job and need money to keep paying bills, you should apply for Universal Credit straight away. This is a benefit payment for many situations, including if you are looking for new employment.
However, if you are locked into long-term contracts, such as your rent or mortgage payments, TV packages and others, the money you receive from benefits is not likely enough to continue supporting the normal way of life when you received a full income.
So, what can you do about this? We’ve made a list of things to consider doing to make any benefits payments stretch further and reduce your immediate household expenses:
You should update your household situation with the local council. Households with only one or no working adults may be due a council tax reduction and be able to instantly reduce monthly payments.
If you’ve forgotten to do this already, you’ll be allowed to backdate your overpayment and get a refund.
- Mortgage Payment
You might be able to get help from your mortgage provider. Many banks and mortgage providers can offer a repayment holiday when you file for unemployment. This will give you a break from paying your mortgage debt (possibly not the loan interest!) for three to six months.
These were guaranteed during the coronavirus pandemic, but now you will have to ask your lender and qualify. The aim should be to find another job while you receive the payments holiday.
- Water bills
Great news – your water can never be turned off even when you cannot afford to make payments. That’s not a free pass to never pay again as other issues can materialise and it will damage your credit score.
You should communicate the situation with your water provider. They’ll probably point you in the direction of certain schemes designed to help people pay their water bill while temporarily unemployed.
For more information about water debts, consult this post!
- Electricity and gas bills
You should also communicate with any energy suppliers to explain your financial situation. They could offer to stop payments for some time, or they may offer an alternative arrangement over the short term.
Use this downloadable letter template to ask your supplier to agree to a more affordable arrangement. All you have to do is include some personal information or account data and shoot it off in the post!
If you have a prepay metre because of poor credit history, you should ask for emergency credit when you need it.
Avoiding their letters and ignoring calls is what can lead to significant debts and legal action benign taken against you. For further support and advice, consider making contact with a debt advice charity.
- Miscellaneous subscriptions
Make a list of all the other services and subscriptions you have. For most households, this will revolve around entertainment streaming sites, such as Netflix. You should seek to cancel as many of these as possible to prioritise essential expenses instead.
You may have miscellaneous outgoings that are not needed while you are not in work. For example, you may want to consider cancelling your car insurance while you do not need it to drive to a workplace.
Groceries are another big cost each week. You can always seek out the local food bank and start using their service to save on grocery costs each week until you manage to increase your income again.
What to do about credit card debt if you lost your job?
If you have lost your job with existing debts, such as credit cards or loans, you may be worried about meeting your minimum repayments on each debt.
The first thing you should do in this situation is to contact each lender to explain your new financial circumstances.
Your lenders may be able to adjust the amount you owe each month to make minimum repayments more affordable, tailored to your personal finances. They are encouraged to do this by various bodies and groups.
Or you may want to ask for a complete repayment freeze, including stopping interest. We have made it easier for everyday people to ask their card companies and loan providers for a payment freeze.
If you have credit cards and an unpaid credit card debt, you may want to consider your options.
Some people in this situation can benefit from a credit card balance transfer. This is essentially opening up a new credit card with a lower rate of interest than your current one and using it to pay off your existing credit card arrears. Thus, you still have the credit card debt, but the debt is not growing as much because of the lower interest rate.
For more information on these types of debts, read our credit card debt guide!
It’s time to start a budget!
Another productive task you can complete when you have entered unemployment with bills and maybe debts is to start a budget to monitor your finances. By creating a budget you can take control of your spending. You’ll create a complete picture of your financial situation in minutes.
A budget is simply a complete list of monthly income – such as benefits – and all of your expenses. You can then divide your spending into essentials and desirable to identify which costs you are able to get rid of while you search for new employment.
You can then adjust your spending, and therefore your budget, to help you save money. We’ve created a dedicated guide on how to cut your spending to help clear your existing debts. Read it here now!
A popular method some people use is to only spend cash so they can easily keep track of their budget.
Start looking for a new job
And the best way to get money to pay off any debt is to find a new job. It can be hard to find work, especially in the current climate and after the pandemic. But don’t give up.
People who genuinely and persistently try to find work typically get a job in time. You could be asked to look for a job as part of your unemployment benefits.
There are countless advice articles online helping you to sharpen your CV and improve related skills, such as interview techniques.
Communicating with your local DWP office about your preferred jobs will always help. There may be courses and workshops available to improve your chances, and there may be additional income to pay for travel to interviews if you don’t have a car, or money to purchase clothes suitable for a job interview.
And never forget that free debt advice is available for people struggling to make ends meet after being made redundant. Contact them whether you have loan debt, credit card debts, or just want to keep up with your bills, several local debt charities could support you.
You can find a list of the best debt charities by clicking here!