Being under debt can be a daunting situation, but hey you’re not alone. There are thousands of people all across India dealing with dreadful existing debt causing unexpected expenses such as medical bills leading to financial insecurity. And if you are expected to have too many payments every month, you might get behind on other financial grail such as building an emergency fund, taking a foreign trip, or saving for retirement.
If you’re looking for one place to start, try making progress each month on reducing your debt. It takes a little organization up front, in addition to a strategy that fits your budget and your preferences. Debt consolidation loans can eventually help you to combine all Personal Loan EMIs and Credit Card bills (if any) into a sole one structured EMI at lowest rate of interest.
Instead of managing several EMIs and credit card bills, consolidate all debts in a single personal loan, further reducing the chances of missing payments as of multiple payment dates and variations in amounts. You can choose a debt repayment plan tailored to an individual’s personalized circumstances- according to their best needs. In general, there are three strategies which help one pay down or pay off debt more efficiently.
- The snowball method
It is understood as to pay the smallest debt as fast as possible. One can pay minimums on all the other debt. Then one can pay that extra toward the next largest debt. Finally, a quick payoff is a quick win and can be a reason for a confidence booster.
- Debt avalanche
Initially, one has to pay the largest or highest interest rate debt as quickly as possible, and pay minimums on all the other debt. Moving onto then paying that extra toward the next smallest debt. Finally, paying off debt can boost a feeling of control and get rid of big interest, too.
- Debt consolidation
To combine debts into a single account. One can substantially avoid any other debt until post-payoff. Furthermore, possibly with lower interest and one account increases focus.
It is not always necessary that debt is a bad thing, sometimes debt can be good to help one build a credit score or accomplish goals- such as buying a house- which could in the first place be hard to do without a loan. But lots of extra debt can outweigh your credit score and add up to interest you didn’t want to pay initially. Thus, to celebrate every extra payment- and every debt payoff, too.
Measures to balance finances while paying off debt
Whichever repayment method one chooses, one would also need to keep up with their ongoing financial commitments. Certain strategies that can assist for same are as follows:
- Fabricate a monthly budget: A well strategized monthly budget can assist a person to accommodate their debt payments alongside their day-to-day spending. To begin with, list their monthly expenses as well as identify each item to be considered mandatory or discretionary.
Afterwards, one can allocate their monthly income according to a budgeting strategy of their choice. The 50/30/20 method is considered a helpful starting point: 50% of their income goes to their necessary expenses that includes their debt payments, 30% to these discretionary expenses along with 20% to savings.
- Ensure debt payments beyond the minimum: To make more than the required minimum payment can assist them to pay off debts more quickly along with saving money in interest charges. Earmark unanticipated funds, such as their tax return or a bonus, for debt payments.
To Establish an emergency savings fund: Though one may want to pay off their debts as soon as possible, it’s also vital to create an emergency savings fund in case an unexpected expense arises. With no kind of emergency savings during a crisis, one may have to rely on a high-interest credit card or a personal loan to cover the costs.
