How to get out of debts

Having a huge pile of debt build up can make life tough and stressful. It is essential to have a plan in place to repay or consider your debt position.

Here are a few ways that can help you to get out of a debt trap.

Make a list of your debts

You have to first understand your debt position, is the borrowed money helping you or creating more problems, see borrowed amounts and debt if taken adequately can be healthy and can help you in many ways but you have to understand how it is working for you.

Make a list of –

Your Creditors

Total Borrowed Amount

Rate of Interest

Monthly installments

You have to understand the problem in order to solve it… Having a clear idea in mind regarding the loan amount can help you work on ways to increase your income and reduce debts.

Know your Income

Before taking a loan or borrowing money always analyze your repayment position. Never try to borrow money that is beyond your repayment limits and later it becomes a reason for your business or personal life to sink. You must then sort clarity as to how much percentage of your income you’d be spending on repaying your debts. You are surely not willing to give away all your income in repayments, you’d definitely need some proportion of your income for other expenses. So understand your income sources and its stability.

Increase your Income

You’d probably have to repay your debts all by yourself at least if you don’t have a hidden trust fund, so you have to look for ways to increase your income in order to repay the debts within stipulated time. Over and above your regular source of income, whether it is a job or a business, look out for additional sources of incomes. It could be freelancing over the weekends or offering your professional services during the spare hours of the day. Increased income will let you lead life with the standard of living, not allowing debts to affect your lives at large.

Cut down unnecessary expenses

Most of the debt facing companies and personal debt takers start to witness issues coming their way due to extremely high and unnecessary expenses that they incur. To reduce the debts, cut down on luxuries and unnecessary and unproductive resources. Failing to do so, may result you in taking further debts just to sustain your basic necessities.

Pay more than you have to

There is no rule that says you can’t pay more than the normal monthly installment, so if you have spare cash with you after paying the normal installment, instead of wasting it on unnecessary luxuries try and repay your loans.

Look for Interest rates

Interest rate can be the killing factor for many people since high interest rate impacts the repayment amount, and your health too. Power of compounding works interestingly well for the interest rates, and if you pull up a loan with higher interest rate, you might end up paying twice the amount in interest over and above your principal borrowed. So manage the interest rate and avoid borrowing huge amounts for a long period of time,

Plan your Budgets

If you plan you have a clear idea of your incomes and expenses you are less likely to face the debt trap. So get a clear idea of your inflows and outflows to live a peaceful life. Plan your budgets in advance and stick to the plan, also if possible keep a reserve fund so that you have spare money for any emergencies that could arise.

Debt which has sunken many business if managed properly can be the rising factor for you or your business. But you need to understand it well.. One such example of business tycoon Anil Ambani who is the owner of Reliance Power and Reliance Communications had a wealth of $48 Billion and was the richest man in the world in the year 2008 has been out of the Billionaire list in 2018 since his group companies failed to manage debts and aggressively made efforts to expand, there should be a balance between growth and debts. This is an example of how debt can be devastating if not managed properly. In my opinion one must avoid taking debt all together and focus on increasing incomes and investing that incomes in creating assets which will further create more money and the chain continues, though debt has one advantage, it pumps you up to get out of it, but its still not the best way to lead a peaceful life. So manage your incomes and expenses to lead a happy and a peaceful life.

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