People tend to accumulate debt over time. Some of the debt is good like a Home or a Car Loan, which are Secure Loans. Sometimes we also forced to take a high-cost debt, which may be in the form of Credit-Card or borrowing from the market at very high interest rates. All of these could lead us into a debt-trap which means that we have more debt that we can repay.
However, not all is lost. You can always get out of a debt trap with some financial prudence. Here are a few smart tips to help you get out of a debt trap.
Opt for debt consolidation: One of the best ways to get out of a debt trap is debt consolidation. This means that you can take a new, lower-cost Personal Loan and pay of several of your pending debts. When you consolidate your debt, you are combining multiple debts into a single debt. Consolidating your debt also allows you to opt for favourable payoff terms, lower rates of interest and lower EMIs.
Stop taking on any fresh high-cost debt: Once you have opted for debt consolidation, you must ensure you do not take on any fresh debts. The idea is to get out of the debt trap so accumulating more debt is counter-productive.
Begin by paying off the expensive loans first: If you are not consolidating your debt and paying off your debts separately, start off by paying your most expensive debt first. Once you have recognized the most expensive debt you need to plan a strategy to pay it off.
Prepare a budget and stick to it: It is very crucial that you create a budget and stick to do. Do not incur any unnecessary expenses, whether big or small, until you are in a financially comfortable position. This means you need to reduce the use of your Credit Card too.
Increase your income: One of the ways to reduce your debt is by increasing your income by taking on freelance gigs, so that you can pay off your debt faster.
Pay off outstanding credit card debt: Since your Credit Card debt is an unsecured loan, you must use it responsibly, because you end up incurring high interest rates and steep penalties for not repaying it on time. You risk paying higher interest rates with every missed payment, if you do not repay your credit card debt in time.
Opt for credit card balance transfer: You could opt for Credit Card balance transfer to a new credit card with a lower rate of interest, which is often a promotional interest rate. However, you should only opt for this if there is a high interest difference and if you can pay off the dues within the promotional period.
Seek professional help to get out of the debt trap: You can approach professional debt counselling agencies that provide advisory services. They also offer repayment options. Counselling agencies help create a budget and set expenditure limits. Some agencies may also negotiate with creditors on your behalf and assist in lowering interest rates and restructuring your loan.
Applying for an HDFC Personal Loan is as easy as clicking a single button. To apply for personal loan, click here!
Don’t want to head into a debt trap? Click here to read more about signs of debt trap.
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* Terms & conditions apply. Personal Loan disbursal at sole discretion of HDFC Bank Ltd.
