Go debt free!

If you get tangled in a debt trap, what should you do? The most obvious advice you will receive is to cut down on your expenses and save up to pay off your debt. You need some quick steps in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.
                           

Forecast debt plan

The principle is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted. List your debts in order with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first.

Low interest rate

One can low the credit card interest rates by doing a balance transfer. This refers to move your credit card to another bank that might lower the interest rate to get your business. Shop around and try to get the lowest interest rate for the longest duration.

First repay your expensive debt

You should look over the interest rates of every credit card you use to make purchases and sort them from highest to lowest. By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards.

Allocate your investments

You may need to do a little reshuffling. Ideally, begin by liquidating any investments, other than insurance products, that are paying you a low tax adjusted rate of return. Then pay off your higher cost debt before lower cost ones. To put it simply, the credit card bills and personal loans must be the first to go. At the same time, you would need to insure that you continue making payments of EMIs on asset loans, used to purchase a home or an automobile, etc.

Negotiate with creditors

Try to explain creditors that you got trapped in bad financial duress and about the hardship the business is going through. Then, ask if they have a plan that may provide better payment terms. If the creditor doesn’t offer one, request a payment plan or a reduced settlement amount.

Visit: www.cibilconsultants.com
Source: Secondary