The new year has started. This year, you should focus on repaying your debts and revisit your debt management strategies. If you have a small loan, you will still have to plan to repay it. On the other hand, if you have a lot of debt, then you have to make extra efforts to repay it. So through this article we are going to tell you some ways, with the help of which you can manage your debt efficiently in 2020, which will help you to repay them.
What is meant by debt management?
Controlling your existing debts through a strategy is called debt management. When debt burden is high on people, they often consider budgeting their expenses and managing debt efficiently using debt management plans. Debt management schemes provide people with a framework of debt repayment, which facilitates repayment of debt by following it. These schemes help well in case of unsecured loans like credit card dues, bank overdrafts and personal loans. Debt management is important. If you have a high debt or have a debt-to-income ratio of over 40%, a debt repayment strategy can come in handy. If you do not repay your loan or you are unable to pay the monthly installment, this can damage your credit score. Not paying the credit card balance or EMI of the loan, you may face trouble in taking new loan in future. If you are very upset with debt and you are having difficulty in repaying it, then debt management plan can be very useful in such a situation. If you have less debt and you can repay it easily, you can manage it comfortably even without a debt repayment plan. But if you have loans from many banks, you can use the loan repayment schemes mentioned below. While working on the debt repayment plan, you should make necessary expenses according to the budget and try to save as much money as possible.
Snowball method
By using this you can bring a loan to your loan. According to this method you should first repay the loan of lesser amount, followed by the loan of larger amount. Because once you repay your small loans, you get a direction to repay the big loans and your total loan amount also decreases. You can reduce your debt by using snowball method through
- Make a list of all your debts and write them in ascending order.
- Except the smallest loan amount, repay the minimum amount of all other loans.
- Pay as much of the smallest loan as possible.
- Once you repay your smallest loan, you can roll over your money.
- Repeat this until all debts are fully repaid.
Avalanche method
This is another method by which you can become debt-free. The avalanche (avalanche) method is the cheapest and most logical way to become debt free. By adopting this method, you can avoid paying more interest. According to this method, the maximum amount of the loan on which interest is being charged should be repaid first and pay a minimum amount of all other loans. Continue this process until you are debt-free. You can save more money by adopting this method.
Consolidation method
Debt consolidation is a popular way of repaying debt. According to this method, all its debts are consolidated under a single loan. This strategy is mainly used to consolidate credit card debts. You can also consolidate other loans under this. This method makes loan repayment more manageable and convenient. Under this, you can club all your debts within a single loan and make monthly payments for the same loan. This way you can easily repay all your loan within 5-7 years.
Debt handling method
This method is not commonly used, but you can use it if you have a high debt burden. Accordingly, you should talk to your lender or bank regarding modifying the interest rates or terms of your existing loan. In this method, two conditions are created –
- In the first case you apply for a reduction in the loan amount. If the bank is ready, you can pay a partial balance instead of your total amount. This will be considered as settlement of the loan by the bank.
- In the second case, the lender may lower your interest rate. In this your interest rate is low and you have to pay the total amount due. In this situation, if you pay according to the settlement rules, you will be debt free.
