How to manage your debt

How to manage your debt

A debt occurs when there is need of money. It can debt be large amount or small when we have it we need to repay before the time.It may have EMIs to pay which can be less or more depending amount taken.In order manage a debt there are many ways which we can follow for example

1. Organising all the accordingly by writing down the interest and the date by which it should be paid which helps us in reminding to pay the debt in time. At the first step you will want to list of all the debts you owe from smallest to largest. Throw all of your excess funds at the smallest balance, while making the minimum payments on your larger loans. Once the smallest balance is paid off, start putting the extra money forward the next smallest debt until you pay that one off this method is said to be snow ball method.
2. Using investments such as fixed deposits, mutual funds etc, the income from these investments can be used to pay the EMIs. Even by making credit through other sources people have skills and talent utilizing in right matter can help the income to be grown and have a good sum of credit so that the debt can be paid off earlier than the given period.
3. By taking a loan amount by checking the interest rate in order to clear the larger debt.

Whether you're carrying credit card debt, personal loans, or student loans,one of the best ways to pay them down sooner is to make more than the minimum monthly payment. Doing so will will not only help save on interest throughout the life of your loan, but it will also speed up the payoff process. To avoid any headaches, make sure your loan doesn't charge any prepayment penalties before you get started.

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It’s possible to use a balance transfer credit card to consolidate and pay off your debts via one line of credit. Many balance transfer cards offer 0% APR for a certain introductory period of time, too, so you can save on paying any interest for, say, 21 months. You may be able to pay off your debt faster when the entire payment goes toward one low-interest balance.

Create (and live with) a bare-bones budget.If you really want to pay down debt faster, you’ll need to cut your expenses as much as you can. One tool you can create and use is a bare-bones budget. With this strategy, you’ll cut your expenses as low as they can go and live on as little as possible for as long as you can. A bare-bones budget will look different for everyone, but it should be devoid of any "extras" like going out to eat, cable television, or unnecessary spending. While you’re living on a strict budget, you should be able to pay considerably more toward your debts. Remember, bare-bones budgets are only meant to be temporary. Once you’re out of debt or a lot closer to your goal you can start adding discretionary spending back into your monthly plan.

Many people around the globe have some sought of debt to be cleared in order to clear people follow different methods or ways which can be easy to pass through for a different mentality of a person even

a country may be in debt by borrowing money when our country’s income is low.Some people they take loans from the corporate banks where the interest will be low compared to the public banks and clear the large amount of debt.When a person is willing to clear the debt before the life of the loan then we have scheme called interest subvention.Under subvention schemes, the home buyer, banker and the developer enter into a tripartite agreement where the buyer pays 5-20 per cent of the money upfront. The rest is paid by the bank in the form of a loan which is disbursed to the developer to continue the construction work. Some of the banks give some of the tips to customers in order to pay off the debt within the given time period here I have mentioned some of the tips mentioned

1. Know whom you owe and how much: The first step should always be about awareness. When you start out on your journey of debt management, you should start with studying the different types of debt that can appear on your balance sheet. This is important since certain kinds of debt may have more serious implications on your balance sheet. Not all debts are created equally, and an effective management strategy revolves around figuring out your entire debt portfolio. So, start with making a list of the different types of outstanding debts; the creditors you owe the sum to; the total amount of debt; monthly instalments; and the maturity date. Additionally, you can also leverage online banking tools to collate this information. You can refer to this list periodically, especially while paying bills. As your debt amount changes each month, you should try not to forget to update this list as well.
2. Pay your bills on time: Late payments on bills make it that much harder to pay off your debt since they involve a late fee. To inculcate the habit of paying your bills on time, you should take advantage of the power of technology. You can set alerts and reminders for your monthly payments on your smartphone. If you still miss a payment, you shouldn’t wait until the next due date to make the payment. In fact, you should make the payment in question as soon as you can. You should also remember that making your payments on time is of utmost importance for effective debt management. While a couple of late payments may not seem like an issue to most of us; but making a habit of missing payments can have a significant impact on both your ability to pay further and on your credit rating (also known as credit score). You can opt for the auto-debit facility provided by your bank to ensure regular payments.
3. Have liquid savings: There is often a mismatch between our financial assets and the liabilities, which tempt us to dip into our liquid savings. This is a potentially harmful move. While refinancing your mortgage at a lower rate is smart, you should also look at immediately rebuilding your liquid savings if you must compromise on them.
4. Have a budget in place: Putting a budget together is an important debt management technique for eventually getting rid of your debt. The process, however, requires a generous amount of planning and patience. The first step is to start tracking your monthly income and expenses. Once you have this area identified, you can think of ways to reduce your everyday expenditure, the majority of which could be wasteful. This money can then be set aside to repay the debt, irrespective of how small the amount is. Then, you should prioritise your debts to determine the most important bills, like utility and mortgage bills, to be paid first. While getting yourself out of the debt-ridden cycle can take some time, remaining focused on your budget and inculcating discipline are certain ways to achieve success in this context. Keeping a budget ensures that you have enough money to comfortably cover all your major monthly expenses. If you see yourself lagging with your payments, start planning well in advance to be able to take early action. Therefore, a budget is extremely helpful in debt management since it puts the extra money to good use (to be used to pay off debt faster).

5. Watch interest rate risk: We may borrow money for a variety of reasons – education, marriage, a vehicle purchase, personal loan, and so on. When you borrow funds at a variable interest rate, the cost of the loan rises with the market rate. This is a significant risk that needs to be adequately addressed by debtors to avoid having to shell out more than they borrowed.

6. Have an emergency fund for backup: Life is unpredictable and can put us in need of urgent funds at any time. And without adequate savings, we’d have to resort to either formal or informal debt to take care of such needs. Thus, one should always have an emergency fund, as a hedge against unforeseen events.

7. Save more: The most important management tenet is to keep saving more. While paying your debt off is great, offloading it at the expense of your retirement savings might just result in disappointment. Instead, you can periodically stock your savings account with adequate funds to help your savings grow over time. The wiser option is to slowly pay your debts off and maximise savings for the future.

S. Vishwa is web marketing analyst at Finology Ventures. With 5+ years of web marketing experience, joined a Fintech company to help people to learn and earn more.