Here you can understand how to overcome a Debt Trap and live peacefully:
- Identify your Debts
You’ve totally used your credit cards. When you have multiple cards and they are breached beyond limits. This is a good sign of falling into a debt trap.
You’ve been missing EMI payments and incurring other charges which brings you at a higher risk. This can take you closer to a debt trap.
Where debt becomes bigger than your salary. This is especially important when the debts exceeds your investments, liquid cash and other bank savings. Sit back & take notice of situations which threaten your financial stakes. Once you’ve identified the real problem, it’s much easier to proceed for a solution.
- Prioritize your spending
Any debt whether its short or long term. Once you have debt taken, you should try and get done with the expensive ones first ( high interest rates, penalties, overheads etc.).
Any failure to repay your debts including interest, penalty charges and principal amount can put you in a spot. Therefore, prioritize your loans in tandem with interest rates and payback period.
- Fix in the Leaks and Build a Plan
If you cannot save enough out of your salary, then check on your expenses once. Cut down your expenditure on non-essential and luxury items. Think of ways to take collaborative efforts & reduce daily expenses for better savings.
You can also keep generating extra sources of income to double up your salary. Initially, all of this may look like a struggle but cakewalk but There are many personal loan apps that you can use to keep a tab on your expenses. Whatever happens, save your money towards disposing off your debts.
Its best to build a savings fund to combat financial hurdles. Create targets which you can meet in a short term. Give away funds in liquid form to flexibility of use.
- Increase your Insurance Cover
Select an insurance cover to protect yourself and family members against unforeseen situations. So, the sooner you buy an insurance, the better it is for premium payments. This kind of insurance will help focus on all your savings and paying off debt obligations without incurring excessive healthcare costs.
- Pay larger EMIs and Payments
Its best to pay off your loans as soon as possible. For this, you should increase your contribution towards EMIs in proportion to an increase in your income.