How to be financially flexible in managing all your debt, be it a Personal Loan or a credit card?
Are you finding it difficult to manage your debt? We guide you on how to keep control.
If you are looking to manage your debt, that entails continuing to repay loans in a timely manner—targeting loans with high interest rates first and not indulging in unnecessary credit spending. However, there is much more to consider when it comes to debt management, including debt consolidation.
Know How Much You Owe
While you can use debt to build wealth, it also makes for easy overspending. The first step towards staying ahead of your debts is to assess exactly how much debt you owe in total. Make a list of your debts, and include details such as the creditor, total amount of the loan, EMI payment and due date. This will help you evaluate the difference between the total value of your existing debts and the total value of your assets. The important thing is that the total value of your debts should be lower than the value of your assets.
There's Good Debt and There’s Bad Debt
Good debt is when you borrow to invest and your investment is likely to increase in value after you have invested. This typically includes home loans, and also education loans that enable you to enhance your career prospects. Bad debt happens when you borrow to fund your lifestyle. This typically includes credit card debt, which has been used to make purchases of no lasting value.
Prioritise Your Debt
Identify the loans that are costing you the most in terms of interest rate, penalties or fees. Address these debts in the order you want to pay them off. This way you can stay on top of your debt and minimise the fees and charges you pay. A good idea is to give priority on repayment to the loan with the highest interest rate since it is the most expensive. You can also consider to paying off the debt with the lowest balance first or pay off bad debt first. This will help you minimise the fees and interest charges on purchases that won’t increase in value.
Consider Debt Consolidation
Have you worked up small debts here and there? On an individual basis, they may not seem like a lot. However, it may mean you are paying higher rates of interest and extra fees. This can keep your debt-ridden longer and really impact your lifestyle. If you are finding it difficult to pay your multiple debts each month, you may consider debt consolidation. Debt consolidation means combining your multiple debts under a single debt umbrella. This can help you get a clearer picture of what you owe and potentially save on overall interest costs.
Benefits of opting for debt consolidation:
- Multiple payments become one monthly payment
- Making one monthly payment can help you avoid late or non-payments of debt
- Makes it easier to manage debt
- Lower debt consolidation loan interest rates
- Reduces your monthly debt payments
- Helps you pay off your debt sooner
- Allows for long-term financial health
- Slowly improves your credit profile
Bajaj Finserv offers debt consolidation loans in India in the form of Personal Loans. As a borrower, you not only get to consolidate all high-interest loans into a single debt with favourable terms, but can also avail benefits such as instant loan approval and quick disbursement.