We opt for different types of loan in our life such as home loan, education loan, etc, to fulfil our multiple needs. Whatever may be the need, there is always a loan for everything. In fact, a loan comes to an individual's rescue during unforeseen circumstances and can be of great of help if EMIs are paid on time. It is our moral responsibility to repay the loan without any default. If he/she has too many debts, then it is important to find out a way to get out as soon as possible.
Here are a few interesting tips that help him/her to come out of debts.
Make a list
It is necessary to make a list of all your debts as you could have multiple debts. Also, add a credit card bill and the amount borrowed from friends or relatives to this list. Doing so will give you an idea on how much debt is pending, interest charges and the time left for repayment
There are certain loans or debts that must be paid immediately. A credit card comes with higher interest rates. On the other side, home loans come with low-interest rates compared to credit cards. Moreover, an individual will also receive tax benefits under a home loan. Thus, it is wise to pay credit card bills first at any cost. One should also have a clear idea on which loan he/she needs to be paid first.
If possible, pay a certain portion of the principal amount as and when there is sufficient money available with you to reduce the interest rate.
For instance: If you took a loan of 30 lakh at an interest rate of 9 per cent for 20 years. The monthly EMI will be Rs 26,034. The total interest which you will be paying for the entire loan is Rs 32.48 lakh. In case, you paid Rs 1,000,00 as a principal amount after paying 13th EMI, then the total interest which needs to be paid will come down to 28.81 lakh. In the long run, the total saving will be Rs 3.67 lakh.
Increase EMI amount
He/she can reduce the interest load by increasing the monthly EMI amount. You might have taken a loan almost 4 or 5 years back but now you might have got a hike and your take-home pay is much higher than what you used to receive 5 years back. Thus, increasing the EMI amount will reduce your loan burden.
Pay less interest by shifting to another bank
Compare the interest rate of your bank with others. If your bank is charging more, then it is wise to transfer the loan account to another bank. Same goes with credit cards as well.
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