Unemployed but servicing a loan

Tuesday June 23 2020

A customer looks at a loan application form. It

A customer looks at a loan application form. It is important to negotiate with your bank over a loan repayment schedule to avoid defaulting. PHOTO | ERONIE KAMUKAMA 


Taking on a loan could be for valid reasons. However, during a pandemic, you could be feeling the pinch more especially if your fortunes have taken a different turn. Losing a job or experiencing a salary cut can be a nightmare especially if you have a loan to service.
As the adage goes, “If life throws at you lemons, make juice out of them.” If you put some careful thought to it, there could be some light at the end of the tunnel. A few experts share how to manoeuvre through the tough season when one has to clear their loan obligations.

Mr Kelvin Kiyingi, a financial inclusion coach, advises one to openly share with their banker about the current situation and assure them of their willingness to pay using other means.

The employer could write notifying the bank about your salary reduction. Therefore, based on your negotiations; your loan can be restructured so that your repayment terms are aligned to how much you are still earning.

Mr Ambrose Byamugisha, a business consultant, also agrees to have a discussion with the bank to reschedule a loan repayment.

“If it is a salary loan, the company will see how it will service the loan. If the loan is with a registered money lender, then you can have a mutual understanding on a humanitarian ground about rescheduling it.”

Albeit, if the money lender is not registered, they stand to lose because they have no right to put you to court or charge you an interest. He can lend you money on a personal ground and not charge you interest if they have no licence. The former’s challenge will be how to remit back their money to their bank,” Mr Byamugisha adds.


The issue of debts has affected governments across the world. It is a very big situation that needs both sides to be heard.

But there is no law that permits anyone’s arrest over a debt as long as somebody acknowledges it. Mr Byamugisha acknowledges, the government asked financial institutions to reschedule payment of loans but not on a personal basis. It is vital to first compose yourself and accept the dilemma as opposed to running nuts over a debt.

However, if one has lost a job, that could be tricky. Kiyingi says, “All is not lost when the bank is notified about restructuring the loan in alignment with other means of survival. For instance, if one has been earning one million shillings, but you lose a job due to Covid-19. Please tell your banker the truth and what you can afford now so that the loan can be restructured.”

Positive mind
If you have lost a job, your mind ought to be intentional on belief, hope and faith.

“The mind creates what you perceive. If you become a coward, depressed, you might end up committing suicide. Hence the first thing to do is believe and have faith for a way,” Kiyingi notes.

It is very important to negotiate with your bank.Kiyingi justifies his preference for banks or financial institutions supervised by Bank of Uganda as opposed to informal money lenders because their conditions aren’t stringent as others who ask for a high interest rate between 30 and 40 per cent.

Accept the loan
Any borrower should know that it is an obligation to make repayments, and according to the agreed schedule. Failure to repay or any instances of default usually prompt bank action in form of loan recovery.

“Don’t run away from your financial obligations. You can negotiate for a pause of one to two months. Thereafter, return to reschedule their loan,” Mr Kiyingi says.

Utilise government securities
People who have invested in government securities such as bonds or Treasury Bills can sell some of the securities to finance their loans. It is not advisable to sell your assets because they are supposed to create more investments unless you are pushed to the wall.

It is time to be creative and keep abreast with current opportunities for making money during this period.

Turn your networks into a resource. Networking is about meeting people and expanding your circle so you can get more done and make a more extensive impact.

Mr Kiyingi admits, “Reach out to your networks such as former school mates, clan members, rotary or fellowship for any ideas or opportunities.”
You can take on part time gigs or freelance work in a field of interest. Don’t just sit home.Work out something.

Go to the Internet, research and think through the various options.

Criteria for getting loans
Once a bank receives a loan application, it has to evaluate it and determine whether the loan application is feasible, especially in terms of risk involved and potential for default.

By collecting and analysing big data, banks have the opportunity to learn more about a customer than the traditional Know Your Customer data will reveal.