Stuck In Heavy Debt? Here’s How You Can Escape The Trap
Financial problems can severely impact a person’s physical and mental health. Heavy Debt can lead to unhappiness and in some cases, people face depression problems in life. If you are struggling to pay your loans and there is no one to advice you then the tips here from the financial experts is definitely for you.
Pay the biggest loan first
If multiple loans have become a major problem but you don’t have the money to rid of these loans then you must try and pay for the most expensive loan among all of them. The financial expert advice that someone who is in debt should pay the loan which has the highest interest rate.
Deepali Sen, who is a certified financial planner and founder of Srujan Financial Advisers LLP explains the above point that is a person should pay credit card bills after the personal and the educational loans have been paid because a credit card payment is the most dangerous one among all loans.
The credit card companies will offer you to pay the minimum amount instead of the full amount due and when you get into the habit of paying off the minimum amount, your free credit period will be over. The credit card after some time will start attracting more interests and because of which it will become difficult to get out of the trap.
Prepay the amount
If you receive an annual incentive then you must use it to pay the loan. A person in debt should try to increase the amount of installment paid every month. According to the expert’s opinion, someone who in debt must try to invest at least 50 percent of his/her increment to increase the EMI if giving the whole increment as an installment is not possible.
Prepare for any emergency
The major reason because of which a person has to apply for a loan is the fact that they don’t have the money to invest for their short-term needs. Experts advice common people that they should create an emergency fund which covers your expenses for a minimum time period of six months.
These funds can be helpful at the time of hospitalisation or any critical condition for which you require the emergency fund. When you do not have an emergency fund, taking a high amount of loan remains the only solution but it has a negative impact on you financially. Changing your lifestyle and only taking care of your basic needs at the time of financial emergency is important. Cutting down on your luxuries and reducing your everyday expenses can help get rid of heavy debt.