There is an old saying that too much of a good thing is always bad, and the same goes for debt. Taking debt from reliable sources can help you get an adequate amount for financial emergencies or if you do not want to use your saved amount to cover big expenses such as buying a car or a house. However, it has immense negative effects if it is taken when someone is going through financial stress and can not cover the regular EMI instalments. Some people who can not afford to pay the EMIs of a current loan take a new loan to repay the old one, and the chain reaction creates a maze of debt, which is difficult to escape.
 

However, there are some ways to escape from high debt and ensure that you stabilise your financial situation. This blog will help you understand ten ways to escape the debt trap so that you can get back on track with your savings.

• A debt trap occurs when excessive borrowing leads to an inability to repay, forcing the borrower into a cycle of multiple loans.

• This can lead to financial stress, lower credit scores, and limited access to future credit.

• You can take numerous steps to escape from the debt trap and improve your financial condition.

Here are ten ways to escape from the current debt trap:
 

Track your spendings

Start by tracking your monthly income and expenses in detail to understand your spending habits. Identify non-essential spending and start avoiding it to save a higher amount to pay off debt quickly.
 

Prioritise debt payments

Choose a debt payment strategy, such as the avalanche method or snowball method. The avalanche method suggests paying off high-interest debt first, while the snowball method suggests paying off low-interest debt first.
 

Negotiate with creditors

Reach out to creditors to negotiate a lower interest rate by extending the loan tenure. Many creditors are willing to work with you to set up manageable payment plans, especially if you explain your financial situation.
 

Debt consolidation loan

Consider a debt consolidation loan to pay off all current debt with a single lower-interest loan. Options include personal loans, balance transfer credit cards, or home equity loans. This can help simplify repayment.
 

Increase your income

Consider ways to increase your income through a side business or by taking on a part-time job. You can set aside this income and spend only on debt repayment. Additionally, you can consider selling unused items for quick cash.
 

Avoid unnecessary expenses

Review your budget to identify and cut unnecessary expenses. Look for subscriptions you rarely use, dining out less frequently, or finding cheaper alternatives for regular purchases. Use the extra savings towards debt repayment.
 

Avoid new debt

Avoid taking on any new debt unless it is a debt consolidation loan. If you have repaid your credit card, try not to use it until you have paid off all the current debt and you can afford timely bill payments.
 

Save on rental income

If you like in a rented house, see if you can share your place with others to save on rent. Look for areas where the rent requirement is low and if you can shift to an affordable place. If the burden is high, you can move back with your family until you pay off the debt.
 

Seek professional help

If you feel that you are deep into debt, seek help from a financial advisor or consider joining debt relief programs. Financial professionals or relief programs can help you develop a disciplined approach toward managing your finances and paying off your current debt.
 

Stay positive

Understand that escaping the debt trap is possible, but it is a continuous and gradual process. Try to save as much as you can and repay your debt steadily without panicking. Maintaining a positive mindset and celebrating small victories along the way can motivate you to continue your efforts until you achieve financial freedom.

Taking debt is ideal if you want to avoid reducing your savings if you have lower liquidity but want immediate cash. However, it is important that you take debt after due diligence and knowing that you can comfortably pay off the EMIs. If you are currently in a debt trap, there is no need to worry, and you can use the ten ways to pay off the current debt mentioned above to escape the debt trap effectively.


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