6 effective ways to pay off credit card debt
Credit cards can sometimes engage most of your monthly income towards paying off debt. This situation most commonly arises when you borrow more than you can afford and when you have significant debts to repay but insignificant funds to pay from.
While this sort of problem needs to be dealt with through careful financial planning and re-strategizing, there are certain sure-shot ways to paying off credit card debts.
1.Consolidate Your Debts
You should consider debt consolidation if you have to repay debt from more than one credit card. This process lets you combine several monthly payments into one that has a lower rate of interest.
One of the most common options of consolidating your debt is to apply for a personal loan. You can consider borrowing from lenders like Bajaj Finserv, who offer Personal Loans of up to INR 25 lakh.
Alternatively you could also use your house as collateral to obtain a loan and clear off all your debts. Once done, you will be left with a single debt which you can pay off through simple EMIs. Several NBFCs like Bajaj Finserv offer loans against properties up to INR 21 crore.
2. Plan Your Expenses
A great way to start repaying your credit card debts is by designing a monthly expenditure plan. List out all the expenses that you incur in a month and determine the things that you can steer clear of till you are free of debt. Stick to this plan until your finances are absolutely in the clear.
3.Take Expensive Debts off the List
When you are planning to repay your credit card debts, always make sure to place cards with high debts on top priority. Pool in your monetary resources and work towards paying the debt on these cards, first. Paying off debts raises your credit score as you lower your debt utilisation ratio, i.e., the ratio of debt you owe to the amount of credit you have available.
4. Pay More than the Minimum
Yes. Always make sure to pay more than the minimum amount. Because if you make a habit of paying the minimum interest, there’s a definite chance that you will carry the debt over for a long, long time.
5. Work on a Contingency Fund
Try to develop the healthy habit of maintaining a contingency fund to tackle unforeseen monetary situations. Now, keep this idea in mind and work towards building one, so that you can bail yourself out of such situations.
6. Tap into Your Savings
If you have a considerably high debt to repay, it’s probably a good time to tap into your savings. This doesn’t mean you have to empty the account entirely. Instead, withdraw just enough to reduce your burden. This can also help you in paying off debts quickly.
Credit cards will be your financial saviours only if you have a solid plan of repaying the resulting debt. So always be sure to have a payment plan ready before jumping into a purchase.