Most of the people employed in the private or public sector take some kind of loans for buying home, vehicle or other reasons, among others. Some students take an education loan for pursuing bachelor, master degree or other professional courses. Nowadays, banks also offer the option of converting credit card outstanding into equated monthly instalments (EMIs). But interest on loans or any debt takes a toll on the earnings. Everybody wants to get rid of their loans or debts as soon as possible.
As 2020 is about to end, here are some ways through which people can reduce or finish their debts in 2021.
Prioritise expenses
There is no limit to spending on things. In order to prevent themselves from falling into a debt trap, they should prioritise their expenses. Don’t spend on those things which are not necessary. Spending on leisure is only advised when someone is earning way more than their basic expenses. Look for options which get you discounts or cash backs.
Save money
Make sure that you save some portion of your earning every month. People should make saving their habit. The money which people accumulate through savings helps them tide over any kind of emergency situation without having to use a credit card or take a loan. If not big expenses, small ones can be met through the money saved over the years. Set a saving target for yourself and try to stick to it. If you have decided to save Rs 5,000 per month, then put this much amount every month in your saving account at any cost.
Timely repayment
Pay all your debts on time. If you have taken any loan, pay your EMIs on time so that no penalty or fine is slapped in case or late repayment. If the amount is due in credit card, try to pay it on time because it attracts a high rate of compound interest. Avoid paying fines or penalties on any debt.
Transfer balance
Banks offer the facility of transferring dues from to one credit card to another. This facility allows people to bring dues to that credit card on which low-interest rate is charged. Under this scheme, transferee card issuer usually provides a promotional interest period during which nil or lower finance is charged. The promotional interest period varies from two to six months.
Keep a tab on your income and expenses
People are advised to maintain a register of their expenses and earnings. This habit will allow them to improve savings and analyse if they have spent on unnecessary things or not. Maintaining an account of income and expenses helps people budget for things like less common expenses.
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