Follow a strict budget: Having a strict budget prevents you from falling into a debt trap and enables saving for future needs. The amount needed for debt repayment should be set aside.
Formulate a repayment plan: If you want to reduce debt, make a list of all your debts and formulate a plan according to your repaying capacity to pay it off
Understanding debt: Borrowers should understand the nature of the debt, especially young ones, so that they can consolidate smaller loans, try paying higher loans first or convert them into longer terms only if you are not able to pay its EMI. This will reduce the repayment burden.
Switch to secured loans: Those who are already under heavy debt, should avoid increasing it, particularly through the credit cards. Liquidate some investments or switch from unsecured loans to secured loans if struggling to pay EMIs.
Use balance transfer facility: One way to reduce the burden of high debt and high rate of interest is by transferring the outstanding balance to another company at a lower rate of interest.
Cut down on subscription-based expenses: Subscriptions that are not needed or used frequently like gym membership etc can be cut down. As, even a small saving per month can lead to a large lump sum saving over a couple of months in the future.
Financial discipline: It is also important to be disciplined about repaying promptly which helps in keeping away from additional fees and penal interests and also improves credit score which in turn gets better loan deals.
Prioritise credit card dues: The interest rate on credit card dues generally tend to be higher than the personal or student loan interest rate.Therefore, borrowers should consider repaying the credit card dues as early as possible.
Prepayment or foreclosure: It can lead to significant savings in interest cost, especially if made during the initial years of the loan tenure. Hence, those having financial surpluses should always aim to pre-pay their loans.
