5 Ways to Avoid Falling into a Debt Trap
Being an adult has its benefits, but it also comes with a set of challenges and responsibilities. And financial freedom is one of them. Amidst bills, EMIs, and monthly expenses, you may feel achieving your financial goals is impossible. On the contrary, financial freedom is all about managing your costs, including debts.
A well-thought-out financial plan can give you the benefit of managing expenses, meeting financial goals, as well as enjoying the advantages of a personal loan. Don’t get scared of loans. With a personal loan, keeping a few things in mind like timely payments, borrowing within your means, etc., is the right way to go. You also need to adopt smart debt management techniques to not fall into a debt trap and accomplish financial freedom.
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Here are five ways to help you get out of the debt trap.
Identify the issue
Without truly knowing where you’re going wrong, how can you ascertain a solution? The first step of freeing yourself from a debt trap is to determine the problem and do a thorough analysis. Of course, there will be factors out of your control, but you can work on managing those in your control. This way, you will have a clear path for your future and not repeat the same mistakes. Sit down, formulate a detailed and meticulous review to help you with your current issues. One viable solution is a personal loan. You’ll learn more as you read along.
Don’t pile up your overdue amounts
It’s the first of the month, and your salary has just been credited. With all this money, it’s tempting to pay 5% of it toward your EMI and let the rest roll over. But this attracts huge costs like penal charges and additional interest. This form of financial indiscipline will put you deeper into the rabbit hole. If you’re struggling with high-interest credit cards, switch to a personal loan with lower interest rates. Use the personal loan EMI calculator to study the numbers.
Make behavioral changes
It’s all about making a few behavioral changes that will help you reduce your debt and ensure you can buy everything your heart desires. Simple things like limiting how much you eat out or order in will not only save you plenty but also help you stay fit. Similarly, rather than taking your car to the store around the corner, walk it up. You’ll easily get your daily dose of exercise. While this seems petty, jot down such tasks, and by the end of it, if you calculate, you’ll see how much you’re saving.
Consider consolidating your loans
Too many loans? It can be hard to keep track of several loans. Rather than tending to different loans with varying rates of interest, you can consider consolidating them into one loan. And a personal loan gives you this option. It’s a straightforward way to not just keep track of one loan but also swap high-interest loans for something with lower interest. Personal loan interest rates are around 15% as compared to 40% on credit cards. Easily simplify your life and get out of a debt trap.
Have an emergency fund
Emergency savings are very important for those emergency expenses or “just-in-case” situations. One of the best practices with a rainy-day fund is to have at least 6-month of your salary saved up. This will help you cover expenses in unlikely events like when you take time off from work, have an injury, or need to meet necessary unexpected costs. An emergency fund, along with the help of a personal loan, can help you navigate tough times.
You can live your life without the unnecessary stress and avoid giving into the issues of falling into a debt trap. All you need to do is change a few old habits and inculcate certain new habits. When you need a helping hand, you can turn to a personal loan. It’s actually a boon! You can avoid high interest rates and other charges with timely repayment.