Managing your debt

July 11, 2023
DD Planet

Taking a loan is desirable at times, however, we need to learn debt management so that we don’t fall into a trap from which there is no return.

Here are the tips and advice to help you manage your debt:

1. Never go for a debt if you don’t really need it.
2. Make it a habit to pay the pending due amount on time for all your loans as it shall not only help you maintain a good credit score but also will eventually make you debt free.
3. Always opt for a cheap loan option. Remember a personal loan is very costly and needs to be avoided unless there is an emergency. Look for alternatives such as an education or student loan if you’re a student, a home loan if you’re going for a debt to purchase a property and an auto loan if you’re planning to buy a car and so on.
4. Use your credit cards wisely and spend only that much that you can pay back easily and timely.
5. When planning to pay off your debt, start with the debts that have higher interests.
6. Make sure the paperwork is in order for all of your debts.
7. Watch for prepayment penalties like in a home loan prepayment.
8. Choose a credit card that gives you maximum buffer for payment at a lesser interest rate.
9. Consider balance transfer if the alternative loan option is offering you a significant advantage. You may even go for consolidating all your debt components to just one or two loans.
10. Develop the habit of prepayment if you have sufficient money in hand to spare.
11. Don’t be a guarantor for the debt of others blindly. In fact, avoid it unless you don’t have a choice.
12. Don’t be afraid to go for a loan if it serves your purpose and at the same time is easily payable.
13. Do not go for a debt that you cannot afford. If you end up paying more than 40% of your income on paying the instalments for your loan, you should be cautious.