A word almost all people in the world unanimously hate is DEBT! Monthly bills and daily expenses have no end to them. There are times when you don’t have enough money but a sudden expense which is pretty much unavoidable pops up. What do you do then?
- Borrow from friends and family
- Use a credit card
- Take a personal loan
The first way can be used for small amounts but what if the amount you need is bigger than a few hundreds or thousands. What if a medical emergency pops up and you don’t have enough money to pay off the bills? It’s unavoidable, one way or another, we get under the burden of debt in life. However, the question is how do you get out of debt once you are immersed in it knee deep.
Got a personal loan (or a credit card debt) whose EMIs have become a constant pain in the neck?
A little Creativity can help you go miles here. Few tricks that can help you pay off debt soon enough are:
1. Negotiate your way out
It’s not a surprise but banks and NBFCs are really smart. No, honestly they play a very smart game with all their customers. You might not even know but there are always ways to reduce your rate of interest or processing fees. People mostly take the rate of interest/processing fees as set in stone. The truth of the matter is that a lot of banks/NBFCs are open to negotiation if you have good credibility. This means that the very first step of taking debt should be negotiating with your lending partner.
When you know a certain interest or processing fee rate works better for you, then you should convey the same to your lending partner. If you do this step right, then you get saved from the burden of having an extreme amount of debt on your head over the longer run.
2. Credit line cards are a recent phenomenon
Credit line cards are basically cards on which you get a pre-approved loan amount which you can use to pay all your bills. Wondering how line of credit cards are different than credit cards? The answer is very simple. While these two products are very similar, the main two differences between their functioning is that line of credit cards offer a larger credit amount (even if you are a new user) as compared to credit cards. Secondly, the interest rates offered by line of credit cards are much lower in comparison to their counterparts.
Two companies that offer credit line cards in India are Stashfin and RBL. Thus, credit line cards are a great way to pay off debt or take credit when and as needed.
3. Converting your EMIs as per convenient
A very simple way to cut down your interest rates on credit card EMIs is to convert your EMI from credit card to personal loan. A variety of personal loan schemes are available in the market that can help in easy conversion to lower interest rates. As you cut down your ROI, you will realise you will save a lot of money which would have otherwise gone into paying off the debt.
Credit cards usually offer reducing interest rates that can go upto 40% for a year while personal loan interest rates are usually lower and can be anywhere between 12-28% (reducing). This will help you pay off debt in a quicker and rather economic manner.
4. Check loan pre-closure charges beforehand
Do make sure that the loan pre-closure charges are next to nil or nil when you consider taking a loan from a specific bank or NBFC. In case, a situation arises wherein you don’t want to bear the burden of EMIs (with added interest) over a longer period and decide to pay the whole loan amount off in one go, you should have the option of pre closure at your disposal. Not only should you have the option at your disposal, but also you should be able to close the loan at the minimum amount possible.
Most banks allow you to get away with minimal charges after the completion of a certain loan tenure, for example – HDFC allows you to get away after 12 EMIs at 3-4% rates Banks like SBI, Axis allow the customer to pre close the loan at any stage after 1st installment at 0 pre-closure charges. This is one way to reduce your loan amount in addition to the heavy interest, over a shorter run.
We hope that now you are not scared anymore of how you will pay off the loan amount. You just have to be smart about the debt management and find more tricks to lessen your burden. All the best with your loan repayment!