Rahul had been saving for months for the down payment on his home loan. Once he had enough savings, he jumped to invest in his dream property. While he availed his home loan, he was already paying EMIs on his car with 5 years of payments still remaining. Months after availing his home loan, Rahul realized that he had accumulated huge credit card debt as he had not undertaken prudent financial planning. Rahul was caught in a debt-trap with more debt that he was capable of paying back.
We are all one financial misstep away from being susceptible to a debt-trap. However, being caught in one does not mean that our entire financial future is doomed. In fact, you can follow some of the tips listed below and undertake some prudent financial planning to get out of a debt trap easily.
1. Consolidate your debt
One of the first things you should do to get out of a debt trap is to opt for debt consolidation. What this means is that you will be able to take out a new lower-cost personal loan to pay off multiple of your pending debts. Consolidating your debt allows you to combine multiple debts into one and thereby you can avail better terms of payoff, lower rates of interest and EMIs. All of these will ease the debt burden on you, thereby improving the affordability of your loans.
2. Stop taking any more high costing debt
Although this goes without saying, you should not undertake any fresher higher costing debt. After you have consolidated your debts, make it a golden rule to not accumulate any more debt which could incur a higher rate of interest.
3. If you are not consolidating, pay off your expensive loans first
Not everyone wants to opt to consolidate their loans together. If you decide not to do so, your first step should be to identify which of your debts are the most expensive. Once you have done so, you should come up with a financial strategy to pay off those first.
4. Talk to your lender about restructuring your debt
Banks and lending institutions understand financial hardships and are willing to help you out in case of any difficulties. You should approach your bank or lending institution about restructuring your loan to make them more affordable to help you out of the debt trap. Banks can help you do so by extending the tenure of the loan, which will reduce your EMI payments. Once you have cleared out of your debt trap, you can opt to increase your EMI payments again.
If you opt for personal loans made available on Finserv MARKETS, you have complete flexibility and control of the principal amount of your loan. Additionally, you can also login to the customer portal to make part-payments for your loan when convenient. There are no part-payment charges on any hybrid flexi personal loans on any Bajaj Finserv personal loans.
5. Pay off credit card debts
Credit cards usually have a very high-interest rate along with penalties for late payments. One of the most important steps you can take is to ensure that you are either paying back your credit card debt in time to not incur such fees or stop any spending on your credit card.
6. Stick to your budget
Once you have accumulated a list of your debts and how you will pay them back, sit down and formulate a budget. You should ensure you cut down on any unnecessary expenses, whether big or small for the foreseeable future. Your financial priority currently is to get out of your debt trap and cutting down on unnecessary expenses is key to achieving that goal.
Also read how you can pay off your credit card debt with personal loan
7. Try to increase your income
If feasible, you should try and take up extra hours at work or take up some freelancing jobs temporarily to generate more cash flow. This additional income will help you pay back your debts faster and will help you come out of your debt trap sooner.
It is very easy to fall into a debt trap and put your entire financial future into jeopardy. Hence, it is critical to be careful about the loans you are availing. For instance, if you get a personal loan on Finserv MARKETS, the process of applying for the loan is paperless and seamless. Bajaj Finserv personal loans are tailor-made to ensure they meet all your requirements. What’s more is that you can easily repay them over a tenure of 12-60 months, ensuring you have financial flexibility.
“Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere”!