Debt is quite useful when you are facing a challenging situation or are short of funds or need to buy an expensive item.The best personal loan can help you fund your child’s higher education, buy a home or car or even fund your business, but needs to be managed well. All you need to do is to ensure that you meet the eligibility conditions and apply for a personal loan or any other loan online.
You can avoid falling into a debt trap by using a mix of debt judiciously while keeping in mind your capacity to repay. Here we talk about some proven ways which will help you manage your debts well and avoid getting into trouble.
The most important thing to keep your debt situation in control is to regularly monitor it. You should write out the details of all your borrowings including personal loans, credit card outstanding balances, home, and other loans, and the applicable rate of interest on them.Check the due payment dates and ensure that you pay them on time thereby avoiding high-interest costs or penalties of any kind. By clearly writing out all the details you can compare them and identify the costlier ones.
Make Timely Payments
To ensure that you are not late in making any due payments or forget about them, you should automate your payments. This will bring in a financial discipline and ensure that the timely payment of EMIs reduces your overall debt besides helping you avoid any kind of penalties or any kind of damage to your credit score.
Pay Off the Costliest Debt First
In the process of settling down or reducing your debt, start with the ones that are the costliest. Debts or loans with the highest interest should be settled first as this will reduce the overall quantum of your debt.
Consider Debt Consolidation
If you have taken a lot of loans, a good option is to consolidate them into one or two. This can be done by opting for a personal loan or using a credit card to pay off all the earlier dues and start afresh with one EMI or one borrowing. This will also help you swap a high-interest loan for a low-interest one. You can use a personal loan eligibility calculator to check whether you can get a loan to consolidate your debt or not.
Build an Emergency Fund
To avoid missing out on your EMIs, you should build up an emergency fund that can be used in case your regular income is hit for any reason. An ideal emergency fund should be adequate to handle your normal expenses of about six to eight months.
Increase Your Income
A good way of reducing your debt burden is by increasing your EMI values with an increase in your income. You can even use your bonus income, any profits earned by you for prepayment of your debt.
These tips can help you handle your debt well and consolidate or reduce it, if needed.