HOW TO PAY OFF BIG DEBTS SMARTLY
Q We have a personal loan, two car loans, and four credit cards, and the repayment is eating up all our income. Can you suggest how to pay off strategically?
AIndeed, it’s always best to plan your finances in such a way that you can get rid of liabilities faster and can save money on interest rates.
There are a few financial regimes that can help in settling the debt faster, but it is vital to understand how you need to settle it without any extra forfeits. I would recommend you make a list of liabilities.
Consider the amount of interest rate you pay on each debt, as credit cards generally have higher interest rates compared to personal or car loans. Rank whichever you consider can be settled easily or which is more important.
Then move towards the monthly financial plan and figure out which expenses can be cut to pull out some extra money.
Give priority to necessity and slash your entire unwanted list. This will help to balance the financial structure in the long term. Use that extra money in paying off the priority loan. But continue the standard instalments and minimum due amount on your cards to avoid any late payment charges.
Debt consolidation can also be an option, but make a proper study before entering into any new debt. Check the monthly cash flow and read the fine print on early repayment terms on existing loans before signing up to a new liability. Also, restructuring the debt might be distressing but could ease if you close a few higher-interest liabilities compared to the lower ones. This will leave you in a position to monitor debts in a smart way.
To pay off the debt faster, you need to have stringent financial discipline. A clear objective and tactical approach will make the process smooth.
DHIREN GUPTA managing director of 4C Mortgage Consultancy, is a financial expert