Repaying Your Debt? 5 Mistakes You Must Avoid
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Repaying Your Debt? 5 Mistakes You Must Avoid

  • Highlights

  • Prioritise your debt then consolidate it

  • Don’t neglect your savings and emergency funds

  • Try not to accumulate more debt while you repay

  • It’s prudent to adapt the right spending habits

You may be paying off a home loan alongside a personal loan. You may have maxed out a credit card or two, or are simply trying to keep a low balance. Whatever your financial circumstances, it’s easy to get saddled with debt—and it can seem especially demotivating to watch your debts grow larger while your savings take the fall for it. But you can overcome your financial stress by using these tips that will help you in paying off debt fast.

Here are five mistakes to avoid when paying off debt.

Not addressing the cause of the debt first

If you find yourself weighed down by large amounts of debt that doesn’t seem to be getting any smaller despite monthly repayments, it’s time to look at where your debt is coming from, and work on fixing that first. Some loans, such as student loans and home loans, tend to have longer tenors and naturally take time to pay off.

However, if a large amount of your debt seems to stem from overactive credit card usage or personal loans for non-essential expenses, you may need to reconsider your spending habits before you’re able to successfully tackle your debt.
Additional Read: How You Can Use a Personal Loan for Debt Consolidation

Not altering your spending habits

When you’re paying off debt, you need to make your repayments a priority and cut back on large expenses until you’re financially stable. If you’re already paying off student loans and a large mortgage, maybe it isn’t the right time to buy a car, or go on an expensive family vacation. You may even find that you need to cut down on routine non-essential expenses like eating out or luxury shopping sprees. Instead, put aside that money towards timely debt repayments.
Additional Read: 4 Simple Ways to Manage Your Debt

Personal Loan for Debt Consolidation

Continuing to use your credit cards

The main source of chronic debt is heavy credit card usage. Often you may find that you’re using the credit card more than you realise, and are saddled with a high credit card bill at the end of the month. This only compounds the debt you already have. Or, you may have tried to pay off one or more of your outstanding debts using a credit card. This is a bad idea, considering credit card interest rates tend to be a lot higher than most loan rates. It is a good idea to avoid using your credit card while you’re working on repaying a loan.

Stopping your contribution to long-term savings

One of the most common mistakes that you may be making when paying off debt is compromising on your savings or emergency fund contributions. Make sure that you’re still setting aside a small amount of money each month in a long-term savings account, even if it means forgoing a luxury expense or two. You don’t want to find yourself with no assets at all by the time you’ve cleared your debt.

Not consolidating your debt

You may find yourself saddled by different types of debt at once. Student loans,car loans, and credit card bills all come with their own interest rates and EMI plans, which can be quite complicated to keep track of. While loan EMI calculators can help you plan your budget to a certain extent, it is still easy to lose track of your repayments. Defaulting on even one loan payment can have serious consequences on your credit score. In such cases, personal loans for debt consolidation are a great way of paying off debt as they offer you amounts up to Rs.25 lakh at nominal interest. The best part is that you only have one regular EMI payment. With a debt consolidation loan, you can make sure each and every one of your payments is made on time and you don’t have to juggle multiple interest rates either.
Check out your Bajaj Finserv pre-approved personal loan offer and use the funds to consolidate your debt. Get access to your customised loan offer in just a single click.
Armed with these tips, you can tackle your debt and become financially secure faster than you think!

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