While you’re enjoying Diwali shopping and sampling delectable food with your family, there’s a devil lurking around the corner that you need to watch out for – Diwali debt. Here’s how you can slay that devil before it gives you sleepless nights.
Diwali in India is more than just a festival: people across the country use this auspicious occasion to make big purchases like cars, gadgets, and appliances that they’ve planned for months. As there’s been a steady increase in the size of disposable income in the hands of consumers over the years, one swipe of a Credit Card is all it takes to complete a transaction today.
Banks and retail stores, on the other hand, try to meet this spiraling demand by introducing a host of special offers and discounts on loans and consumer durables at this time. Just as a lot of careful thought and planning goes into making a purchase, it’s important to spare an equal amount of thought to decide how to tackle the dent in your savings that the purchase is going to make. In this article, we’re going to share some easy and nifty tips that you can use to stop that Diwali debt from mounting and marring your post-festive fervour.
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Check the size of your debt
Now that you’ve decided that you’re going to do something about your burden of debt, start off by evaluating the size of your debt. This will help you devise alternatives and decide on the next steps towards repayment of this debt.
Don’t let retail tricks get the better of you
Retail outlets employ a host of techniques like decoy pricing where a product is placed next to a slightly lower-priced product of much lower quality or a much higher-priced one of slightly higher quality. This way, you’re tempted to pick the product thinking it’s reasonably priced for the quality you’re getting. And watch out for discount traps like “buy one get one free” where the discounted price possibly covers the price of both items. So, while going on a Diwali shopping spree, it’s good to keep your eyes open.
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Clear your debts using idle cash or liquidate other assets
Clearing your Credit Card debt should be your top priority. Use your Diwali bonus or consider redeeming units in your Mutual Fund or liquidating your Fixed Deposit to clear a good chunk of your Credit Card dues.
Negotiate with your bank
If you anticipate that the debt at hand is going to be unmanageable, you can try to negotiate with your Credit Card issuer for a better deal on repayment terms like asking for a lower interest rate or to convert your Credit Card outstanding into EMIs.
Additional Reading: Help With Credit Card Debt
Opt for a green Diwali next year
The post-Diwali fervour can often be ruined by depression-inducing, fat bills. But you can avert this situation next year by adopting small but impactful measures like upcycling diyas and light decorations from the previous year and opting for a cracker-free Diwali.
Don’t borrow more than you need
Having a good mix of credit is certainly a prerequisite for a healthy Credit Score. But, before you consider taking a Personal Loan to take care of the big Diwali purchases, assess your ability to pay back the loan easily checking its repayment schedule. Determine exactly how much of a loan you can take by first calculating your fixed and variable expenses.
Opt for a debt consolidation loan
If you’ve accumulated debt on multiple fronts, you might want to consider a debt consolidation loan to pay off all your dues in one go. With a debt consolidation loan, there is a single creditor you need to pay every month and your creditor will handle all your other loans for the rest of the month. The advantage of debt consolidation loans is that they offer lower interest rates and involve lower monthly payments but the tenure of repayment is longer so read the fine print before you decide to take a debt consolidation loan to finance your other loans.
Pay off your debt to maintain a sparkling Credit Score
A big festival like Diwali may trigger the inner shopaholic in you but it’s good to remember that there are several financial responsibilities that you will need to fulfil in the latter half of the year. Timely repayments on your Credit Card and loans and having a good mix of loans and Credit Cards are important not only for a good Credit Score but they also build your credibility as a borrower. Before approving a Home Loan or a Car Loan, banks check your Credit Score to gauge your capability to pay off the loan. You can follow these steps to ensure you maintain a shiny Credit Score.
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We understand that Diwali comes only once a year and thus you get only one shot at splurging on yourself but don’t let the debt devil dictate your financial choices for the remainder of the year. Adopting responsible financial measures like honouring your Credit Card payments and following the tips that we’ve shared above will help you rein in your expenses and keep the debt devil at bay.
Have a good mix of Credit Cards and loans? If you’ve been making your payments on time, you probably have a fantastic Credit Score. If you want to check your Experian Credit Score for free, just click the button below.