Are you stressed out, thinking about how many more EMIs and principle amount of your loans need to be cleared? Burdened by those huge interest rates and not able to figure out what to do? Well, here are a few quick steps that you can take.
Rank your debts:
Do this, by arranging in the descending order, starting with those loans which eat up a huge part of your savings and have huge interest rates like the credit cards which carry 40% interest rates, then the personal loans, consumer durable loans which can come at 16%, car loans at 15%, education loan at 12-14% and the cheapest being the home loan at 14%p.a. Once you have set this order, you will get an idea as to what can be done so that your finances can be redirected efficiently towards paying these debts off.
Club multiple loans:
If you have a loan on multiple cards, transfer those loans to one single card or take huge loan to repay them off completely. By assuming this pursuit, you will be able to make payments much more efficiently than before. However, look out for deals on bankbazaar.com and opt for those loans that have a lower interest rate and are available cheaply. Loan against insurance policies, PPFs etc come at a much cheaper rate ranging from 12-13% p.a. making them much more affordable than a personal loan or credit.
Clear off your dearer loans:
Those loans which have been heavy on your finances for quite some time now need to be cleared. Finance those huge loans by cheaper debt like loan against mortgages, which include assets like your property, shares or mutual fund units. Generally, these loans charge an annual rate of 12-14% which Is much cheaper than an unsecured loan and an easy way to clear off your huge debt.
Liquidate low value investments:
If you think that certain investments are not, or will not generate a good amount of returns in the future, it is better to liquidate such assets . For example, if you hold a post office savings certificate which provides you a return of 7.5%p.a and you need to repay your personal loan at the rate of 24%, it is advisable to liquidate such assets and contribute towards reducing the loan burden. And once you have managed that settlement, then you can rebuild your investments by saving your salary income again.
Negotiate with your lender:
In these trying times, even your bank would not want you to become a default. So, when you are short of income or think that you may not be able to pull the repayment schedule as decided earlier, approach your bank. This will help them to analyze what can be done best for you to get rid off your debt by extending the loan tenure or paying a lump sum amount of the principle at a lower interest rate.
Cut down your expenses:
Although this might be the last advice, but it sure is going to help you a lot if you are keen on following this mantra. Do not get carried away by various lucrative deals and offers that banks or lenders offer. Give priority to those expense and purchases that are needed for you and your family high up on the list and the one’s that are for leisure and entertainment right at the bottom.
So if you plan to make any big purchases, save as much as you can and remain debt free.