Various instant credit options such as credit cards and instant loan providing platforms have made life easy for individuals by offering immediate financial help and liquidity during an emergency. Having said so, reckless lending from a credit card or aimless borrowing can get one into a debt trap easily. Experts say this can derail one from one’s financial goals and force one to use up all savings.
Here is how you can reduce your debt burden:
Strict budget
One can follow a strict budget to avoid falling into a debt trap. Following a proper budget also helps one save for long-term financial goals. For instance, if the loan amount due is high, prioritizing monthly expenses is the right way to go, besides spending only on essential things. Experts say, before taking care of monthly expenses, one should keep aside the amount required for repaying one’s debt.
Take a note of all debts
Make a list of all debts, including student loans, personal loans, credit card dues, etc. to keep track. Along with that include the balance amount that is due of each loan and the minimum payment tenure. Experts say this way one will be able to calculate the total amount due, keep track of it properly, and get rid of it fast.
Prioritize debt
If a borrower has more than one dues, he/she needs to prioritize their debt, as some types of loans have a higher interest rate than others. For instance, the interest rate on credit cards is usually the highest and should be prioritized over personal or student loans.
New credit
When in debt, the first rule one needs to follow is not to get into any new debt. By switching some unsecured loans to other loans such as a home loan top-up or gold loans could also reduce the burden of debt.
Consolidating debt
Also, by understanding the nature of each debt one can get together various smaller loans into a longer-term, lower-cost loan. This way the overall debt is reduced. Experts say by consolidating multiple credit card dues or personal loans into a single loan, one can not only reduce the interest cost but it also makes it easy to track repayments.