Debt commonly refers to a sum of money you owe to someone be it a bank, a moneylender, or a friend/relative of you. Debt has become an integral part of most of our lives. This is because at some or other phases of our life we borrow money to meet our different requirements. According to research, approximately 70 % of our population lives with debt, it may be a home loan, a personal loan, car loan or owing money through credit card. One of the reasons behind this is the wide availability of loans these days and hence people find it easier to borrow money to fulfil their requirements. 

Debts help us to get high education, purchase property, meet medical emergencies or start our own business. Though debts are considered bad, when managed properly it can bring a huge difference in once finances. When managed well they can even become the stepping stone of one’s life. As debts help us to achieve our goals in the easiest way ever. When a debt is managed well it makes our life much easier. However, if not managed well, it will come back haunting us. 

The general perception of debt is that they are just another name of evil. But if you change your outlook on credits, the other side of it will come to notice. Debts can be considered beneficial with debt management strategies and disciplined repayments. Once you miss a payment, the situations will change in an instant. You will start getting reminder messages, mails, calls from the bank, and in the worst cases, the collection agents will start visiting you. It is not only restricted here, late payment and default are also mentioned in your credit history which further reduces your future creditworthiness. 

However, being in debt is not a big deal for anyone who has a regular cash flow. But being unable to manage the same is something that can become a stumbling block and hinder our progress. 

Here are some guidelines for those who are struggling with debt. The next few minutes spent reading below will help you to manage your debts better. 

Optimize Your Debts– If you are a person who has several debts then this is the time when you need to sit calm and optimize your debts. Make a list of all your debts, the outstanding balance, the EMI of each credit, the interest rate, etc. This will give you an overview of your credits. Knowing how much you owe will help you to manage your monthly budget too. One must be clear about how much has to be paid every month.

Don’t Miss Payments– Missing payments by a borrower can turn a good debt to bad debt. Theoretically, there is no concept of a good loan or a bad loan, and all debts are the same. But, it is the payment habit of the borrower which makes a loan call a good or a bad loan. Let your loan be a normal one instead of making it good or a bad one. Pay your EMIs every month on the fixed date. If the repayment amount is not fixed, be assured that at least the minimum amount needs to be paid. Paying your EMIs regularly will slowly lead you to that ultimate day when you will be able to announce yourself debt-free.

Prioritizing your Debts- Different loans come at different rates and tenure. As mentioned earlier, one must optimize the debts to find out the costliest one. Once you find out which loan is costing you more, you can work towards closing that particular loan. This will omit one credit from your credit list and make you take a step towards being debt-free.

Try to Refinance– A loan refinancing means taking a fresh loan to close your existing loans. Generally, a loan refinance is done when a person has more than one loan and when he/she pays a lot of money on EMIs in total. 

Refinancing is the best way to handle this type of scenario, where one takes a loan which is equivalent to the total outstanding amount of all loans and closes all the existing loans through one new loan. A refinance will make a borrower pay a single EMI instead of paying EMIs of a different amount to different lenders on different days of the month and it also saves a lot on the interest.

Live Within Your Means– When you are in debt and your monthly outgo towards your EMIs is more than 50% of your net monthly income then you need to understand that you are in an alarming financial situation. When you are left with only 50% of your income to run the family, you should be economical while spending your money. One must be able to differentiate between ‘needs’ and ‘wants’. Eliminating all the wants from the purchase list and focusing only on the needs will make you save some amount every month. Savings should never stop, it doesn’t have any relation from your debt. Saving not only helps you in emergencies, but it can also act as your saviour in your tough time.
Though the loans are widely and easily available one should opt for them only when it is actually needed. A loan is considered as life saviour aid when you take it for a genuine reason and you are capable of paying it back.