A debt or loan is the money you owe to someone, but from the financial context – is a contract held between issuer and borrower on a prefixed rate of interest to repay the original amount for a particular maturity period (or span of bond). You would find many debt instruments that are available in the debt market namely bonds, debentures, term loans, fixed deposits, letter of credit, credit card loans, public and corporate deposits, overdraft facility, etc to get you in a lucrative trap.
Once you are stuck into this burden, don’t panic for there are some ways you need to read them below to save money for reducing the outstanding amount.
• By viewing credit report, list out your total debt balance in order of highest to lowest interest rate and details of loan amount owed to each creditor.
• Analyze your budget by knowing how much income is left from taxes and other monthly expenses to clear your debts.
• When savings are less then curb your unnecessary expenditure to keep a check that your budget does not exceed the earnings.
• Make a feasible debt reduction plan accordingly to clear the highest debts first as it attracts more repayment till you reach the smallest debt.
• Try to exhaust few of your immediate options like using emergency funds to meet the unexpected expense, take assistance from family and friends and switch to the automated payment system (EMI) to ensure systematic reduction in debt.
• Encashment of cash accumulated from a life insurance policy or to withdraw some amount from retirement plan as long as it does not have hefty charges can be considered to reduce debt only at your own risk.
• Look for any household items that is not a necessity or too much to retain and sell them for saving more money to clear the debt.
• Figure a way out to transfer balances for high interest but make payment for such balances on time to avoid additional fees.
• Inculcate practice for minimum monthly payment of debts on a real-time basis and see a possibility in raising the bar for such clearance.
• Negotiations with lender would be helpful to cut down on maturity period, interest rate and reduced settlement of debt.
• Do attempt consolidating different debts into a single personal loan or other convenient loans that you can quickly pay at the shortest time possible.
• Majority of people have bulk existing credit card loan, and it’s advisable to settle the monthly payment than just minimum amount by choosing the highest interest rate card first.
• Undergo credit counselling if you are clueless on how to pay too many debts on time.
• Temporarily downsizing subscription services like TV, outside eatery, outings, shopping, etc can aid you to reduce some portion of the debt.
• By opting an increase in your income by targeting a full-time job with high CTC or additional part-time employment will help to pay your debts sooner.
In the end, dealing with positivity and consistent effort will lead you to the final victory of freedom from the chaos of owing someone.