If someone finds themselves deep in debt, or in a repeated deb | FitRichSane

If someone finds themselves deep in debt, or in a repeated debt cycle, remember that there is no magic wand that will solve your troubles today. However, if you decide to flip your financial life around, here are a few of the steps you can take:

*Rank debt in order of their cost and deal with the costliest debt first. Typically, credit card dues and personal loans will be the most expensive, and work to eliminate them from the outstanding debt list. Low cost debt and debt that provide tax benefits such as home loans and education loans can be dealt with later when finances permit.

*If the cost of debt is high, then cheaper re-financing is an option. A lower cost loan can be availed to repay the costlier loan. A credit card balance transfer is an example of such refinancing

*possibility of extending the tenor of the loan can be explored. This will reduce the monthly outgo in debt servicing. However, the loan will be repaid over a longer period of time and the total interest paid over the tenor of the loan will go up.

*If none of these is possible, then the borrower should inform the lender about the problem and explore a revised loan schedule. It should however be noted that such re-scheduling of loans hurts the borrower’s credit history (also known as credit score like Cibil score).
This will affect the chances of obtaining loans in future or the cost at which they will become available.