DEBT CONSOLIDATION - HOW TO GO ABOUT IT?

Friends, in these recessionary times everyone wants to stay light on debt. Hence people are staying away from borrowing money now and avoiding debt. But for those of us who already have debt on our head and want to get light on this account need to get their debt consolidated.

Debt Consolidation is a process where the company will consolidate the customers all unsecured loans into another unsecured or secured loan to offer the benefit of lower interest rate , lower EMI etc to the customer. Simply put its a process of taking a new loan of lower interest rate and foreclosing all your current high interest loan ,thereby paying only 1 EMI at a time.

There are quite a few ways wherein a person can consolidate his/her debt. They are:

1. Taking DC loan

First and the most obvious one is to take a Debt Consolidation loan from a company which will foreclose all your high interest loans like credit cards dues , personal loans etc and offer you a new loan at a lower rate of interest. This will help you save money due to the lower rate of interest charged. Also you will be required to pay only 1 EMI against multiple EMI you were paying earlier. Find out the best company in your area before taking DC loan.

2. Pay Off your Credit Card Loans

If you are one among those who have the habit of having huge credit card outstanding regularly and revolve it, then first thing that you need to do is to prioritise the payment of your credit card debts . Nothing is more important than paying off your credit card bills as the dues on credit card attracts atrocious rate of interest. Lot of people I know would have high credit card balances and also decent money parked in their savings account. This is blatant error one does due to fact of knowledge , I presume. Savings account will give you at best 5% returns while on your credit card debt you end up paying anywhere between 35-40% p.a. Just imagine the difference. So wise thing would be to remove money out of savings account and clear off your credit card balance now.

3.Explore Partial Prepayment Option

If you have loans where the outstanding is large and you can not pay off the entire thing at one go,then try exploring partial prepayment option. Most of the banks offer the option of partial prepayment of your loans. This will help reduce the principal outstanding on your loan thereby reducing the resultant interest charged to you. So great way of bringing down your debt/liabilities.

4. Taking good Balance Transfer Option

Another great option to bring down ones debt is to go for good balance transfer options in the market. This works very well for credit cards but for loans like Housing loan etc also it works very well since due to competition,companies keep offering to take your loan at introductory interest rate which may be lower than the one you are currently paying. for credit card , lot of companies do BT for 0% for a fixed period. It works well if you are looking for lower debt in near future and intend to pay off everything little later.

5. Switching to another company with better rate

Another option worth looking is to look at companies offering you the same product at much lower rate and switch to them . for instance, if you have a housing loan from say Company A at 12% for 20 years and then due to market forces if you see that Company B is offering HL at 10% for 20 years, then it makes sense to switch to Company B by foreclosing the loan at Company A. Company A might charge you foreclosure fee so do your maths and switch.

6. Don't get back to old ways

Last but not the least , is the fact that once you do manage to bring your debt in control avoid the temptation of going back to your old ways of extravagance. Stay disciplined and keep your debt in control through financial discipline.


Stay Wise n Stay Wealthy...

Comments

Post a Comment

Popular posts from this blog

TAX IMPLICATION ON GIFTS TO RELATIVES

We all do indulge in the practice of giving and receiving gifts both monetary and non monetary. But these gifts at times can attract income tax on it and as such one needs to know the exact tax treatment of gifts both in the hands of the person gifting and the person receiving the gift. Gift to wife or spouse - If you make a gift in kind or cash to your spouse then it is not taxable in their hands. However, any income generated by the gift in kind or cash shall be treated as your income. Gift to fiance - Any gift given in kind is tax free. However , cash gifts are tax free only till Rs 50000. If the gift amount exceeds Rs 50000 then the entire gift amount is taxable in the hands of your fiance. Gifts on marriage - All gifts received on wedding are tax free. There is no monetary limit attached here. Gifts to parents - Any gift in kind or cash is tax free in the hands of your parents and does not lead to any tax liability for you either. In all the above cases, one needs to reco...
Read more

Should you buy Gold from Banks ??

Image
The dream run up in Gold prices in last few years has enticed all and sundry as an attractive investment asset class. It has not only proved to be an excellent hedge against inflation a, reputation it holds with elan since time immemorial, but also, has delivered returns in excess of debt, equity etc as an asset class. Thus , it has emerged as the Best Investment Option in last few years. However, skeptics believe that gold has had its share of dream run and may not be possible for investors who are entering into now, to expect the same kind returns in future . But, if you are on of those who believe that best years of gold as an asset class is still ahead of us and want to invest in physical gold then you must be pondering where should you buy the gold from? These days we have seen most of the banks aggressively positioning them as place where one can buy physical gold bars/coins etc. The other option is offcourse our old Jeweller , both unorganized and large organised players...
Read more

IPO INVESTING IN PSU - GOOD WAY OF MAKING MONEY IN STOCK MARKETS

I have always stayed away from directly getting into equity markets. This was inspite of my firm belief that equity is the best asset class to invest in if one intends to make money over long period of time. The reason why I stayed away was my inability to devote enough time to research the stocks before investing and hence I always relied on Mutual Funds for equity investing. But, I always had this urge of making quick buck in equity markets. The most popular mode of short term investing in stock markets in via trading either intra day or for few days trades. But IPO investing for listing gains can be a great opportunity for common people to make money in stock markets in India. This I can talk from my own experience of investing in CIL IPO. For retail investors there was money to be made in this IPO and I personally made About RS 19000 in this IPO on an investment of Rs 46000. That's cool 46% in less than a month's time. This extra 19000 could be used to pay off my electrici...
Read more