When you have a consistent income and working for a good company, it’s bound to get many loan and credit offers from many leading companies.
While it’s good to avail some good loan deals and credit card offers to fund your emergency needs, it may not work if you have too many loans. That’s where the issue of the debt consolidation starts.
People don’t understand the difference between their needs and desires and hence, take many unwanted debts and find it difficult to manage later on. The solution is striking a balance where you need to save as well as invest.
If you are one of those people who is trapped in many debts, this post will help you in the debt consolation easily.
Easy Tips to Help You Manage Your Debt Burden:
1) Compute Your Debt Burden
The first step towards dealing with debt stress will be calculating your debt burden and noting down all the EMIs that you need to pay monthly. Add all the EMIs together and see if it’s more than 50% of your monthly income or not. If you see it shooting above the 50% mark, you can ask your lender to extend the tenor so that you can reduce the debt by smaller EMIs. Hence, you will pay lower EMIs and still pay off the debts without defaulting.
2) Keep off Using Personal Loans and Credit Cards Unless It’s Urgent
When it comes to the unsecured loan types, credit cards and personal loans have become popular owing to easy processing, wider tenor, and quick approval. However, these debts come with the highest interest rate and that’s why you should use them only during an emergency and not fulfill your wish.
3) Pay off The Biggest Debt First
It’s also better to make a list of all your debts and loans and start with your most expensive debt and end with the least stressing one. Hence, try to pay your most expensive debt first and try to pay as much as you can towards it. That does not mean you should not pay other lesser expensive loans – keep paying them as well. Once you have finished off paying the most expensive one, move on to the second most expansive and follow the same debt management strategies.
4) Make a Budget and Stick to It
Did you know why so many people are trapped in debts? It’s because they don’t know the priorities of life and the other thing is no awareness of needs vs. desires. Some people avail of debts to fulfill their desires – no, debts are for emergency purposes only. Thus, it’s better to make a budget and be self-disciplined while dealing with your unwanted spending.
5) Build a Contingency Fund
During the course of your employment, you should ensure to keep aside at least 10% of your salary towards the emergency fund. You can use the money for debt consolidation or deal with an emergency when you don’t have other sources of money. You can also use the amount to make some prepayments towards your loans so that you may reduce the principal and interest to pay off the debts sooner.
You just explored how you can consolidate debts and the benefits of debt consolidation that you can enjoy. Now, managing the debt stress will no longer be impossible if you follow the discussed tips.
By Lucia Adams
who is a professional writer and blogger.