It makes no difference how much debt or loan you have on your name; setting a goal to eliminate these debts is a significant accomplishment. To accomplish this goal, you must employ the appropriate tactics and programmes for debt repayment.
The majority of people fail to achieve their goals as a result of poor decisions. A sound approach and self-discipline are critical for paying off debts without jeopardising your overall budget. Making all your debt payments on time or utilising your resources to pay off your loan is not a prudent move. Here are five risky debt repayment methods to avoid:
If you use your credit card for all financial transactions, such as paying bills, and opt to pay off your credit card debt in one lump sum, you will experience the gratification of a zero credit balance for a while. However, there is a possibility that you will incur new debt in the near future.
If your credit card spending is irresponsible and you make frequent purchases with your credit card, the easiest way to pay off your debt is to alter your spending patterns. Avoid using your credit card for all payments; instead, use your debit card to keep an eye on your expenditure. Thus, paying off your outstanding account in one go is not the solution; rather, it should be used intelligently.
This is another significant decision that you should never make to repay your debts. Never use your emergency savings to pay off a bill unless you are severely in debt or a true emergency circumstance.
If you utilise your emergency money to repay debt, you may experience financial insecurity if you are faced with medical expenditures, another issue that requires immediate cash flow. Put an end to the temptation to utilise your funds to pay off your debt to obtain temporary respite. Rather than that, you should seek ways to increase your income or savings to pay off your existing debt.
Taking out a gold loan, a loan against your property, or utilising mutual funds to pay off credit card debt is not a prudent course of action. You should not take out such secured loans for the purpose of obtaining immediate gratification.
Gold and real estate are your hard-earned assets, and they should not be mortgaged to obtain a loan to pay off debt. This adds to your strain, as you will be under pressure to reclaim your assets from the bank or financial institutions. Avoid taking out a longer-term loan unless you are in an entirely out-of-control situation.
Are you considering paying off all existing debts in one easy step with cash from your PPF and FD? These are the funds you’re setting up for the future to accomplish specific financial goals. You should not use these funds to make payments on your credit card balance.
Debt settlement entails negotiating with bank officials to end your loan in exchange for a predetermined amount rather than the real interest and principal owed. This will provide you with peace of mind because you will be settling your debt by making a reduced payment.
Settlement of a large loan is not a wise option, as it will have an adverse effect on your CIBIL score. The bank will record a negative entry on your credit report, and you may have difficulty borrowing money from any bank in the future.
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