How to manage debt?
- Take a look at credit card and loan statement:
As per C. S. Sudheer review Bangalore, you should pull out and study credit card and loan statements to see how much you owe to creditors. IndianMoney reviews advice paying off expensive loans first. Check free credit score to understand debt position. If you have repaid loans but not closed loan account, do so immediately to improve credit score.
- Get rid of expensive loans:
Personal loans and credit cards are unsecured loans with high interest and many people have complaints about them. Credit cards charge 24-36% interest a year. An Indian Money reviews says pay off expensive loans first for efficient debt management.
Never overburden yourself with debt. Choose and clear debts which can be repaid quickly. According to CS Sudheer Indian Money Bangalore, you need to keep long-term loans like home loans and education loans aside, unless you get a sufficient large sum (windfall like bonus or inheritance) to make a pre-payment. Understand tax benefits vs pre-payment in home loans and education loans. You get a tax deduction of Rs 1.5 Lakhs a year under Section 80C on home loan principal repayments.
There’s Rs 2 Lakh a year tax deduction on home loan interest repayments. First-time home buyers get an additional Rs 50,000 a year on home loan interest repayments, subject to certain conditions. You get tax deduction under Section 80E on education loan interest repayments.
- Avoid further credit:
Make sure there are no loans, close to retirement. Availing more loans shows credit hungry behavior affecting credit score. As per CS Sudheer complaints review, you need to convert all emergency purchases to EMIs to make easy repayments. If you need money urgently, liquidate fixed deposits or other investments. Most FDs give around 6-7% interest rate, but loans and credit cards charge much higher rates. Liquidate investments to repay loans.