Friday - - Ask The Experts -

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

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