Take charge of your debt before everything takes control of you, ladies!
The conventional wisdom regarding debt is that you must find ways to get rid of it as soon as possible.
“Take control of your debt before it takes control of you,” well-meaning advisors would frequently advise.
Nevertheless, this should not be construed as a term to be feared. A specter that follows you around for all the wrong reasons. Rather than a concept that must carefully research, understood, and effectively managed.
There are alternatives to get loans for your life demands without falling behind on your repayments or falling into a base cycle of debt traps. With a bit of care and a lot of awareness!
Hiral Jain, Co-Founder & CFO of Market Pulse Technologies, shares a few key points to remember when dealing with debt:
1) Get into debt for the right reasons.
The motivation for incurring debt should be crystal clear to you.
Take on debt for things that truly matter, such as education, real estate, and business expansion, and avoid spending it on commodities or accumulating goods excessively.
“Whatever it is that you desire, it is savings, patience, and investments rather than a loan. The goal of incurring debt should be to ensure returns greater than the total cost of the debt. Examine whether your reason for taking out a loan has the potential to increase the value of the investment for which took it out in the first place, “Hiral explains.
2) Borrow what you need.
Before you take out a loan, identify, assess, and carefully estimate the absolute necessity for the debt, planning out the trajectory of your costs as much as feasible.
“Borrow what you need, based on your calculations. You could also plan to pay off the debt in installments to ensure that the money is used effectively,” Hiral said.
3) If you have multiple debts, plan ahead of time and prioritize them.
Consolidate your debt if you have debts in multiple areas and more than one loan active at the same time.
According to Hiral, you can connect with a private loan with a lower interest rate and a compliant pay schedule, ensuring that your total, accumulated outstanding amount is paid off with relative ease.
Another approach would be to prioritize.
Pay off your most expensive loans first, and then organize them by outstanding balance. Determine which of them requires your immediate attention!
4) Create a Repayment Plan
The most effective way to avoid a debt trap (a situation in which you are forced to take out new loans to repay your existing debt obligations) is strictly to adhere to your repayment schedules. Keep a record of your payment dates to ensure you don’t fall behind.
It’s more challenging to avoid furthering your debt when dealing with late fees every month. Investigate a cash flow plan for interest and principal repayment.
5) Preparation is the best defense.
While there may come a time in your life when you feel compelled to take out a loan, getting the skin and improving the ability to operate your finances smartly is by far the best way to keep yourself safe and thriving.
“Reduce your spending, increase your savings, and try to pay off your debts as soon as possible.
If your money is stuck in dead investments, where the return on investment is less than the cost of borrowing, it makes sense to liquidate such assets to clear the debt, partially or entirely. ” advocates Hiral.