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6 Crucial Debt Management Tips to Learn in 2024
Over the past couple of years, the number of people applying for some form of credit has increased due to a host of different factors. Most of this is usually attributed to the economy picking up and more people borrowing credit. To add to it, applying for loans has become convenient thanks to online KYC, instant disbursal, simple eligibility criteria, digital lending technologies, and more.
While this empowers people to fulfil their financial goals more conveniently, having multiple debts can often become difficult to manage. This is where debt management comes in. It is a practice of minimising debts by organising and repaying them in the best way possible. If you are someone who is finding it difficult to manage your outstanding loans and credit card bills, then this article is for you.
Managing debts can seem like a difficult task, but you can simplify it with proper financial planning, budget management, and responsible spending. Here are some debt management tips that you can follow
Keeping track of your repayments is the foundation of a debt management plan. Create a list of the amount you are supposed to pay every month, including the name of all the creditors, and other details. Then prioritise your debts by taking their interest rates and date of repayment into consideration. Ideally, try to repay those with the highest interest rates first. This will enable you to decide if you can and should take on new credit. Just remember, taking a lot of credit negatively affects your credit score.
Missing your monthly payments can make things even more difficult for you. Apart from having to pay the missed amount along with the current month's payment, you will also have to pay the penalty, which further impacts your credit score negatively. A good solution for this is setting reminders about the repayments or scheduling them to be sent automatically via your bank account.
By preparing a budget for all kinds of expenses and debt payments, you can keep better track of your financial situation and find which expenses you can cut down on. A good practice would be to classify your future financial expenses into long-term and short-term goals and prioritise them as per their requirement and urgency. By sticking to your budget, you can manage your debt well.
Paying your debts on time is important, but you should consistently aim to pay the full amount, not just the minimum amount necessary. If your financial situation allows you to repay your debts at once, you can consider this option. Many leading NBFCs let you pay off your debt before the end of the tenure without levying any foreclosure charges, so take advantage of that.
Having a backup fund in case of an emergency will help you handle emergency financial situations better. You should set aside some funds to meet any sudden expenses. This could be a lump sum amount or a part of your savings that you keep aside monthly.
Consolidating your debts means using the funds from a fresh loan to repay other debts. Some leading NBFCs in India like Poonawalla Fincorp offer Personal Loans for debt consolidation at attractive interest rates. By opting for debt consolidation, you will only have to repay a single loan with better terms.
Debt management is important for maintaining your financial health and managing your expenses better. With debt consolidation, creating a budget, and more, you can reduce your outstanding payments with ease. So, consider following the above-mentioned debt management tips and tackle your debts head-on.
Some of the most effective ways to manage debt include analysing your debts, creating a detailed budget of your expenses and income, and prioritising your spending. You should also pay your dues on time, and consider debt consolidation to manage multiple debts with a single loan.
Several debt management strategies will help you, but the key to making them work is by being more mindful of your expenses and stick to your budget.
Here are some techniques that can help you reduce your debt in 2024
The principal is the total amount of money that is borrowed from a lending institution. As the borrower, you must repay it in full over time along with the interest. For example, if you have borrowed a loan amount of Rs. 5 Lakh, this Rs. 5 Lakh is the principal amount of your debt.
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