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Managing of your credits vs loans

Now that we have seen what is Credit Score, Let’s check out some ways by which we can manage our credits and Loans. We may all be fond of the movie ‘Confessions of a Shopaholic’, you’ll know what happens when you live beyond your means. Lured by high-end fashion, a young woman keeps borrowing until she pushes herself to the brink of a financial disaster. Well, the movie may have had a happy ending, as most movies go, but in reality, you may not be as lucky as the film protagonist - Rebecca - was.

So, if you are someone who are the habit of borrowing to meet your targets, I think it is time to sit back and think – are you Ina position to repay your debts comfortably? We are hear with some handy tips that you could use that would help you manage your credits and Loans.

Manage your Loans Responsibly.


1. Repay Loans with High Interest First

Make a list of your debts according to the interest rates. Credit Card debts and persona loan depts tend to come with a higher interest rates, on the other hand, a Home Loan or Student Loan is likely to have lower interest rates while offering tax benefits. It is, therefore, a good idea to pay off the debts with a higher interest rate than to pay of the ones on to ‘safer’ side.


2. Consolidate your loans

For instance, let us consider a scenario where you have paid off you Car Loan. But you still have a huge outstanding Personal Loan and Home Loan, along with the high credit bills. It is always better to take a loan against property to reduce your burden, and hence you can own and pay off the high interest debts.


3. Got a bonus?

Make a prepayment

It is tempting to spend on a lifestyle purchase when you receive an unexpected bonus or investment return. But if you are under a pile of debt, it would always be more practical to dig your way out of it first. The first thought when you receive an unexpected bonus should ideally go towards debt repayment.


4. Got a salary hike?

Increase EMIs

Whenever you get an increment in salary, try and increase you equated monthly instalments (EMIs) as well. The more amount you put towards repaying in your EMI the faster you can repay your debts - and the less you will need to pay by the way of your interest.


5. Switch loans

This is particularly valid for Home Loans. If you find another bank offering a significantly lower interest rate than your existing lender, you can consider switching your loan to the former. But do check the prepayment charge and the new lender’s processing fees.


6. Request a lower interest rate

If you’re an old and established customer of the lender and have a good credit score, try to negotiate for a lower interest rate. You might get lucky.


7. Make timely payments

Paying several EMIs is bad enough. Do not add late payment fees to it. Besides, this affects your credit history. Hence, it’s a good habit to make your payments on time.


8. Cut expenses

If you have tried and failed all other possibilities, here is something you should do. Try and cut down on all avoidable luxuries such as eating out and going out on weekend trips. Lead a low-key life until you have repaid all your debts. You’ll get enough chances to make up when you are clear of them again.


Bottomline

Loans are serious financial commitments that should be taken up only when you are confident enough to manage loans alongside your other day to day expenses. With a little planning you can enjoy life and live within your means so that creditors never hound you. A disciplined lifestyle will help you repay what you have borrowed, and allow you to live a debt-free life.

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