Credit Score: Bad credit score can spoil your work, know why it is important to keep it better


Easy loans and credit cards combined with a stable source of income over a specified period create the guise of financial stability. Sometimes this may prompt you to borrow to fulfill long-pending desires.

Eventually, you reach a situation where the monthly expenses and loan installments exceed your monthly income. In desperation, you again borrow more. If this vicious cycle continues, you are in a debt trap even before you realize it.

Some people get caught up in this due to loss of job, loss of business, emergency medical expenses in the family, or other crises and become so entangled that it is difficult to repay the loan. However, there is always a way out of this.

First of all, you need to understand the seriousness of the situation and the importance of immediate correction. Rishi Mehra, CEO of Wishfin.com says, “To maintain reasonable savings, you need to assess the needs and cut down unnecessary expenses. This will help you repay the installment on time. If you have savings that are equal to the outstanding loan, make better use of them to pay off the loan.

Secondly, if you have borrowed from multiple sources, you should know which loan is the priority to repay. It should always be your priority to pay off the credit card dues and outstanding personal loans first, as these come at high-interest rates.

You can then repay secured loans, such as gold loans, car loans, and loans against property, as they usually have lower interest rates.

If you do not have enough savings but have assets like property, gold, or cars, you can take a loan against these things at low interest rates. This will help you in clearing expensive debt like credit card dues.

You can also ask the lenders to extend the tenure of the secured loan. This will reduce the EMI and make it easier for you to repay the loan. If your income increases in the future, you can always repay the loan ahead of time.

If your income is not enough even to pay off the low-cost loan, but if you have an asset like gold, car, then don't hesitate to sell it. As far as the property in his possession is concerned, experts caution about it.

Abhiroop Rishi, the partner at Fundamentum Advisors, advises, "First, do a fair appraisal of the immovable property in your possession, then decide whether to sell it to pay off the debt.

Unless you have decided to buy a house or flat to live in, the decision to sell the occupied immovable property is not a good one.

Also, don't hesitate to ask for interest-free loans from your family or friends. If none of the solutions work, then finally contact the credit counseling centers that have expertise in getting people out of the debt trap.

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