Every financial advisor or expert will tell you to plan your finances wisely for long-term stability and security. However, when you have accumulated liabilities and are struggling to pay off your debts, your financial future only seems stressful. We understand that these situations can be tough for anyone.
A few basic strategies, practical steps, and smart financial decisions can help you come out of such a difficult time. For example, you can avail of flexi loans to consolidate smaller debt as they charge less interest rates and have easy tenures. Other options are also available depending on how big or small your debt is.
There are several other techniques to repay your loans and secure your future. Have a read to know more:
Debt Reduction Strategies- An Overview
In simple terms, debt reduction techniques include effective methods that help people repay their private loans and other debts. These are highly-recommended measures to get rid of financial liabilities and debts without carrying on the burden for long. These tax reduction methods are applicable regardless of the loan amount. However, before deploying these techniques, it is essential to zero in on your financial goals and plan a path toward achieving them.
Planning a Financial Future with Debt
Prioritize Your Debts
Now that you are planning to reduce your debt, listing all the debts you own makes sense. Once you have jotted down your personal, unsecured, and even small loans, sort them based on priority. Loans with higher interest rates or that are older should be on the top.
Consolidate Your Debt
Taking another loan to repay the previous one sounds odd but it is a smart financial choice if you are charged lower interest rates by lenders. Some banks offer loans to consolidate debts at a 7-12% interest rate while other non-banking institutions charge 11-14% interest on loans to consolidate debts. You can even make the best of some innovative repayment strategies offered by banks. Do your research to find a loan that suits your tenure and repayment strategy.
Ensure an Adequate Insurance Coverage
Adequate insurance coverage assures you that your family won’t have to fulfil your debt liabilities in case of any unforeseen incident. Get insurance coverage for the sum that exceeds the loan amount you owe to lenders. Moreover, insurance mitigates the risks of external factors that can hamper your financial goals, especially when you are the only earning member in the family. As you receive tax incentives on insurance purchases, it won’t strain your pocket.
Switch to a Flexi Repayment Plan
If the bank pr lender allows you to change your traditional loan to a flexi personal loan at the same interest rate, then opt for the plan as flexible repayments reduce your EMIs by up to 45%. This is because interest is charged only on the amount you use out of the sanctioned amount. When you have surplus money from additional income, pay higher instalments and repay just the interest amount when you are short on cash.
Invest Surplus Money Wisely
How you invest or use your surplus money directly affects your debt repayment strategy. Therefore, plan smartly while utilizing your additional funds. You can use the additional cash to create an emergency fund for rainy days or invest the funds in a highly liquid instrument for instant funds accessibility. This will help you avoid raising more debts in the future and generate minimal returns from investments.
Plan Your Finances
It is extremely important to balance your income and expenditure in the most ideal way. Get familiar with your personal finances to manage your debts. Make some efforts every day for balanced budgeting as there is no shortcut to getting rid of your loans except through effective financial management. Create a realistic monthly budget and financial constraints as well.
Decide on Short and Long-term Goals
Yes, there is a lot of stress when it comes to managing your finances, but this shouldn’t distract you from your short-term and long-term financial goals. Planning gives your financial condition a perspective and ensures sound decisions. You can consult a financial advisor or planner to create a well-thought strategy to attain these objectives.
Basic efforts, meticulous strategy, short and long-term planning, and foresightedness can help you overcome your liabilities while keeping financial stress and worries at bay. So, incorporate the above-listed strategies if you are unable to manage your debts.
Tanvi Kaushik specializes in Content Marketing and works with the Digital Team at KreditBee – India’s fastest personal loan platform where self-employed and salaried professionals can easily avail of personal loans in just a few minutes when in need of quick funds. Tanvi writes to-the-point articles on personal finance and budgeting which are truly appreciated by her readers. She is committed to making money matters easy to understand even for the layman. Her commitment to her work doesn’t stop her from pursuing her hobbies of hiking, trekking and going on adventurous trips.