Kunal, a very aspiring young millennial, recently relocated to Delhi with his wife and 4 year old son in view of a growing career opportunity. He had been on a constant look out for home appliances and home improvement services to set up the new home he just rented. Finally, he could fuel his house with comfort and make it a dream home. No sooner than 2 months of relocation, he realised that he had been finding it difficult to meet ends and cover other lifestyle expenses that he had kept on hold. He decided to take some time off to find where he was lacking and contributed efforts to set things in order.
On taking a deeper dip into his expenses and budgets, he realised that most of his income is being consumed in paying off credit card bills arising from the purchases done for home improvement and a personal loan he had availed to purchase a Car. After paying these debts, he could barely spare sufficient amounts for all the other unavoidable daily expenses and nothing at all for savings.
He really wanted to find a solution to this, as he wanted to spare money not only for savings but also for his desires, passion, and leisure. So, what did he do to have his finances sorted?
If you are wondering the same and have also encountered a situation like Kunal where your finances are prompting you for attention, here are a few steps you can take to curb the debt trap like situation and free up some funds for yourself –
1. Find the root cause
It is important to find the exact reason that has led you in the debt trap kind of a situation. Be it multiple high interest debts, credit card bills, or uncontrolled spending habits, delineating to the root cause will help you eradicate the issue at grassroot level and help you plan your budget prudently. Thus, you must carefully assess your income and expenses and spot out the reason that led you into a debt trap.
2. Control splurging
While you are in the process of revising your budget, look at your past expenses and notice any signs of indulgence in overspending, especially on things that are not the need of the hour. Concentrate on necessities before jumping on towards fulfilling wants. Next time, you are spending, pause and ask yourself, if you really need it. This way, you will be able to make room for expenses that require genuine attention and will give you the time to recover from any damages already done.
3. Consolidate to lower interest rate loans
Keeping a track of the debts availed is a good habit. If you have multiple credit cards that generate extensive outstanding bills, you can opt for debt consolidation. Debt Consolidation will help pay off all your credit card bills by taking one single personal loan. And we all know that credit cards demand a way higher interest rate as compared to personal loans. By consolidating, your debts become more manageable and affordable to service. Likewise, Debt consolidation can be opted for by consolidating debts arising from multiple personal loans too.
4. Look out for flexible repayment plans on loans
Before applying for a personal loan for Debt consolidation, you must ensure that you carry out extensive research in order to pick a lender that offers good repayment plans. There are many lenders who offer personal loans online with an easy application process and flexible repayment plans. Choosing a flexible repayment plan that suits your needs will help make the debt more affordable to service.
Related article – A Guide to Understanding Loan Repayment Plans offered by LoanTap
5. Keep room for emergency funds
It is always advisable to keep aside some amount of your monthly income towards an emergency fund. If you make room for emergency funds, it helps meet unforeseen cash crunches and enables you to deal with emergencies without having to dive into your savings.
6. Timely repayments towards debts
The major mantra to good debt management is making timely payments towards your debts. Be it credit card bills, personal loan EMIs or any other loan, making timely payments will ensure that you are operating according to your planned budget. Any delay may not only be penalty heavy but also may tamper with your next months’ budget.
In Kunal’s case, he realised that the uncontrolled spending and high dependency on credit cards had led him into that mess. He researched and got himself a personal loan to consolidate all the debts. With careful planning, execution, and the right choice of personal loan, he managed to bring his finances back on track in less than 3 months. So if you find yourself walking towards a debt trap, you certainly know what to do!