Thanks to the easily available credit cards and personal loans offered by various banks and financial institutions, most people have been lured into opting for them. What one forgets is the fact that it is a loan that needs to be repaid. On top of that, these loans or credit card usage comes at a high rate of interest. The high rate of interest increases the total quantum of debt taken, and if not repaid on a timely basis, may even spiral into a debt trap that would be difficult to come out of. aDebts are like a vicious cycle that once you enter engulfs you. Hence, the sooner you get out of the debt trap, the better it is for your financial health.
Here are few ways that will help you combat the debt situation in your life and get a grasp of your financial health.
Take Stock of the Situation
The first step that you need to take is to come clean. Take a pen and paper and jot down all the loans that you might have taken. No matter how small or big the amount is every single amount needs to be mentioned on the paper and totaled so that you know exactly where you stand. This would act as a reality check for you and help you to deal with the situation upfront.
Debt consolidation is one of the best ways to take stock of your debt and help you in getting out of it. As the name suggests, once the first step of totaling your debt has been completed, you need to find a way to repay the same. In such a case, it makes sense to opt for a single loan that will help you repay all the smaller ones. There are various advantages of opting for debt consolidation, one of them being that instead of monitoring and servicing all the various loans, you can only concentrate on servicing one single loan. Also, comparatively the rate of interest in this case is also less than most of the loans that you would have taken earlier. With the variety of debt Consolidation options available in the market, you can find one that suits you the best.
Opt for Secured Loans
If you count the number of loans you have incurred and study their rate of interest, you will see that most of the loans that have high rate of interest are basically the unsecured loans. These are like the credit cards and personal loans. Instead of paying a huge sum of money in servicing the loan and paying high level of interest on them, it makes sense to opt for a secured loan where the rate of interest will be far less than the unsecured one.
When you default on a loan or delay in paying the interest on time, then it adversely affects your credit rating. Hence, try and mend ways and repay the loans on time to ensure that the rating is not affected. This will help you in getting future loans with ease as banks look at the score to determine if loan should be given to you or not.