7 Easy Ways To Pay Off Debt
What is debt?
Most of the people accumulate debt over time out of which some loans are good such as home loan or car loan as these loans are secured loans. But, sometimes one is forced to take a high cost loan due to dire circumstances. In such a situation, a person can take a loan in the form of a credit card or can borrow from the market at very high interest rates. All these types of loans can put a person in a debt trap which will lead to more debt and will have to keep paying off that debt.
What is debt trap?
A debt trap is a situation where you are forced to borrow more than you need to pay off your existing debt. Over time, you end up in a situation where the debt spirals out of control, exceeding your repayment capacity, leaving you trapped in a debt trap.
There are two reliable indicators of a debt trap:
- EMI-Payment Ratio
- debt asset ratio
Best Ways to Pay Off Debts Fast
If you are stuck in the web of debts due to any reason, do not worry as it is not the end of the world for you. With some financial prudence, you can get out of the debt trap forever. To help you get out of the debt trap, here are some of the easiest and best ways to get out of debt.
Pay off high-interest loans quickly – The first thing you need to do is identify the loans on which you are paying the most interest. Among these, the number of credit cards and personal loans comes first. You should pay off these loans first. For this, you have to work according to a solid strategy.
The strategy is to pay off the maximum amount each month to pay off high-interest loans early, even if you can’t pay off the rest of the loan. This strategy helps you reduce the overall interest paid on all loans. There are also some loans that provide you tax benefits such as education loan and home loan. By taking this type of loan also you can reduce the actual cost of high interest loan.
If the income increases, then the repayment also increases – This is an easy way to pay off the loan fast. Under this, if your income increases by 8 percent, you can easily increase the EMI you pay by 5 percent. Through a 5 percent increase in EMI, you can end a 20-year loan in just 12 years, thereby saving you a huge amount in interest charges.
Debt Consolidation Option – Debt consolidation is one of the best ways to make your financial condition healthy. If you have several high-interest loans or outstanding credit card dues, you are slowly inching towards a financial mess. To get rid of all such debts, taking a low interest personal loan is a very smart move. Personal loan helps you clear all the outstanding dues and converts your multiple payments into one monthly payment towards your debt consolidation personal loan.
Why does it make sense to take a debt consolidation loan?
- A debt consolidation loan gives you the flexibility to lower your interest rate, lower your monthly payments and pay off your loan faster.
- It enhances your financial independence and helps you budget your monthly expenses properly.
Since, you need to make only one monthly payment instead of multiple loan EMIs, you reduce or eliminate the - chances of defaulting on payments. Thus you avoid late fees and high interest rates.
- This ensures timely payments thereby improving your credit score and enhancing your creditworthiness for future loans.
If you have decided to free yourself from the debt trap, then taking a Debt Consolidation Loan and Personal Loan from MoneyTap can be a smart decision and an easy way to pay off your debt. Download the MoneyTap app, and enjoy the benefits of a personal loan.
Convert outstanding bill to EMI – You can easily pay off all your outstanding bills such as credit card bills by converting them into EMIs. For this, you can request to convert your outstanding credit card bill into EMI by visiting your bank branch.
Most banks charge a nominal interest rate for these EMIs with a specified tenure option. These EMIs can be deposited directly at the bank branch with a check or can be directly deducted from your account with the bank’s automatic payment facility.
use your investment – The investment made by you is also one of the best ways to pay off the debt. If your debt situation is really bad, you can use a life insurance policy or some other investment to pay off the debt and get some relief. Investment instruments like life insurance and PPF offer the investor to borrow against the balance amount from the third financial year of investment.
make lifestyle changes – After falling into the debt trap, you must accept that some of your debt burden is due to expenses you could have avoided and the money you saved could have been used to pay off the debt but still afford luxuries and It’s not too late to cut down on those unnecessary expenses. You can still come out of the debt trap by making changes in your lifestyle and by cutting down on unnecessary expenses like regular movie shows, dining out and weekend parties.
