How to get out of loan traps ?
1. If the situation is such that income revival is going to take some time, the immediate need is to cut down on wasteful personal and household expenditure. Many people hesitate to do it, thinking that this is a small step. But big things happen when many small steps are taken together. Think of all those extras - movies, restaurants, clubs etc. - which can be cut down but won't affect the core of your life. Sitting and writing it down would help you come up with a list and which in all likelyhood could be substantial. This can surely help in bringing down your expenses by 5 to 10% in a month.
2. Overmanage your savings bank account: Keep only the bare minimum amount of money in your savings bank account. Whatever amount that you have as surplus over the minimum balance, invest them in alternate, higher interest earning investments. Even fixed deposits are a fine start as they pay more than the savings account.
3. Interest rate structure: Lending institutions have an automated process of resetting of your loan interest rates. And if you do not pay close attention, you may find that your interest rate might have been regularly going up and the interest rate that you are paying currently is far higher than what you signed up for in the beginning. The best thing to do then is to get your interest rate structure modified with the lender, by paying a one-time fee.
4. Build your credit score: The best and easy way to build your score is to ensure that your loan repayments and credit card repayments are always in time. Use your credit card in a very limited manner. For any expense that you incur pay in cash and limit the use of credit card.
5. Take up freelance work: You can always earn some extra money, however small it may be through some freelance work. Browse the net to find out avenues where you can get the type of work that you can deliver. Elance.com is a reliable site for doing freelance work and earning some money.
6. Above all, don't let any form of depression eat you: It is important to keep oneself motivated and have a positive outlook to the future. Hoping for a better future and taking all possible steps to move towards it, would surely pay. It might test your patience in the short term or the medium term, but would surely benefit you in the long term. So, keep your chin up and look at things positive more
2. Overmanage your savings bank account: Keep only the bare minimum amount of money in your savings bank account. Whatever amount that you have as surplus over the minimum balance, invest them in alternate, higher interest earning investments. Even fixed deposits are a fine start as they pay more than the savings account.
3. Interest rate structure: Lending institutions have an automated process of resetting of your loan interest rates. And if you do not pay close attention, you may find that your interest rate might have been regularly going up and the interest rate that you are paying currently is far higher than what you signed up for in the beginning. The best thing to do then is to get your interest rate structure modified with the lender, by paying a one-time fee.
4. Build your credit score: The best and easy way to build your score is to ensure that your loan repayments and credit card repayments are always in time. Use your credit card in a very limited manner. For any expense that you incur pay in cash and limit the use of credit card.
5. Take up freelance work: You can always earn some extra money, however small it may be through some freelance work. Browse the net to find out avenues where you can get the type of work that you can deliver. Elance.com is a reliable site for doing freelance work and earning some money.
6. Above all, don't let any form of depression eat you: It is important to keep oneself motivated and have a positive outlook to the future. Hoping for a better future and taking all possible steps to move towards it, would surely pay. It might test your patience in the short term or the medium term, but would surely benefit you in the long term. So, keep your chin up and look at things positive more
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The best way to curtail wasteful expenses is to maintain a list of monthly expenses made every month. After the expiry of the month, you can go through the items and you will be surprised to find that many were wants and not needs. In other words you will find many which would have been avoided. Next month take care to avoid these expenditure. Do this exercise and you will be surprised to find that after 6 months of review you would realise that your monthly expenses have come down. This surplus you can invest every month in a Bank recurring deposit account. After the expiry of say 3 years, you will have a handsome amount at your disposal. Reinvest these and continue the cycle. Saving is a habit and cultivate it. Another principle is do not anticipate your income (say bonus etc) and spend in advance and repay it after getting that income. Take now pay later should be avoided at all costs.The list is not exhaustive but illustrative. more
Jun 26
Very good advice. In India today, we are bombarded by advertisements which encourage people to spend on frivolous things. When you have an urge to buy on impulse, adopt the 3 day rule. Postpone your purchase and review after 3 days whether you still think that you MUST go ahead with your expenditure. You will be surprised that in 90% cases better sense will prevail. Do not spend on vacations just because a credit card company says it is cool. By all means if you have the money in your account and you can spare this after paying all your essential, go ahead with the vacation. But the vacation is totally uncool if you are going to pay a heavy interest to your card issuer later. Use credit card as strictly a cash substitute which means you can pay for your purchases from the money that you have. Settle card bills in full. Better to avoid cards altogether or use only prepaid/debit cards. more
Jun 25
