Revealance of the priority in which the debts should be paid

Easy availability of loans has made our life much easier. It’s convenient way to acquire life’s necessities. But, wait! If loans has made our life so much easier, then why people at times fail to meet the deadlines which are making their life difficult? And furthermore, it also puts you under pressure as a portion of your monthly income is truncated towards paying the EMI. If planned well, you can actually reduce your burden by shedding your liability. Now, if you have several debts to clear, aim to prioritize loan repayments to clear the most expensive ones first.

Personal loans comes first

Being unsecured loans by nature, are offered to you on the basis of good credit history or a sound income stream. Start by attacking your most expensive debt. Simply put your personal loan as bad debt, so pay it off as soon as you can. Prioritize the obligations with the highest interest rates. Paying off the highest, most toxic debt will free you up sooner and help you pay less in the long run. Plus, it will take a load off of your mind.

Unproductive loans

The other loan debts does not involve tax benefits like loan against property, gold loans, loan against insurance policies, fixed deposits and auto loan. You should repay these loans as per the interest rates. Gold loans come at comparatively lower interest rates! Loans against insurance policies, fixed deposits attract less interest rate compared to gold loans and loans against property.  Such loans captivate less interest rate in comparison to personal loans.
Finish up with home loan

Home loans are the most popular debt in India. You can enjoy tax benefits on repayments of a home loan. Home loan consumers often find themselves in a dilemma when it comes to choosing between fixed and floating interest rates. Nobody can predict which way interest rates will move and hence it all boils down to personal choice, cash flows and appetite for risk. However, you will be charged for every switch that you make during the tenure of your loan. You can prepay your loan fully or partially, depending on the terms of your loan. However, do remember that the cost attached to paying off your loan early, if any, in the structure of penalty does not restrict the benefits.
By following the above mentioned step by step priorities, you can actually enjoy the ecstasy of debt-free life. At times, you may find some investments yielding higher interest rate as compared to the interest rate being paid on the existing debt. While making any financial decision, do consider the advantages and disadvantages of either to go for paying off an existing debt or an investment.
Visit- www.cibilconsultants.com
Source Secondary