Plan how to keep up with loan repayments when earnings fall

When Jacqueline was hired by a local commercial bank as a direct sales representative, she was relieved to have finally got a source of income, however irregular, after a long period of joblessness. 

She had been out of work for four months after she was retrenched in a programme to cut costs during the recession.  

A year before she was retrenched, Jacqueline had been promoted to a senior public relations manager, with her salary and allowances doubled to match the added responsibilities coming with her new position.    

She secured a bank loan of Sh500,000 against her new salary of Sh80,000, at a monthly repayment rate of Sh20,000 to be paid over three years.

She then set up a saloon to complement her income and was comfortably repaying the loan until she lost her job. Her saloon also soon collapsed .  

Emergency fund

Because she was only left with her emergency fund to survive on, Jacqueline asked for a grace period of four months from her creditor to look for another source of money.  

She was fortunate to get the sales job just as her emergency fund, the only source of livelihood that had seen her through the dry spell, dried up.

Her debts had meanwhile piled up and the bank was calling frequently to make a follow-up on her loan repayment. 

Four months into her new job, Jacqueline’s reprieve seems to have been be short-lived.

Her income which is purely on commission terms, can hardly sustain the loan repayment or help her to meet her other monthly expenditures.  

Jacqueline’s main problem is how to repay her loan consistently from her irregular income, a challenge that faces many people who work on commissions or operate sole ventures with fluctuating incomes.

To stay afloat in such a situation, you need to create an income buffer and a repayment plan that will work out both during low and high income tides. 

Just like budgeting with irregular income, start by adding up all your essential expenses over the months and work out the average monthly amount.

Also add the loan repayment amount to the average figure.