Detailed analysis of debts can help you to remain debt free

The National Foundation for Credit Counseling (NFCC) conducted the Consumer Financial Literacy Survey in the year 2016. The survey points out that one out of every 3 carries forward the debt on his credit card from month to month. The survey points out that more than 2/3rd of those in their 30s are in the debt bracket. Such youngsters would have availed various kinds of loans like, for example, the car loan or the home loan. Such people should evolve effective debt payment strategies so as to get rid of this oppressive burden of debt.

Which loan to clear first

With various types of loans that you have availed many times, it becomes difficult to prioritize the repayment. Some financial consultants may suggest you to clear the debts with a higher rate of interest. On the contrary, some may suggest you to clear those debts for which you are paying a higher amount of EMI. According to David Gal and Blake McShane, the researchers of Northwestern University’s Kellogg School of Management, in the long run, clearing debts with higher rate of interest is one of the effective debt payment strategies.

Analyze the debts:

This strategy in turn calls for making a detailed analysis of your debts. Open a spreadsheet and make a list of your debts; the amount you are paying towards principle, interest and things like that. Now, you can pinpoint the debt for which you are paying a higher rate of interest. Naturally, this helps you to make effective repayment strategies.

Keep a tab on your expenditure:

Now, you may have to restructure your budget and find the areas where you can save money on your recurring expenditure. For example, find out if car pooling is possible so that you can save on gas.  In many cases, you may have to discipline your lifestyle so that you can avoid wasteful expenditure. If you are in business, you may have to stay in your showroom for a couple of hours extra, which can help you to have a higher turnover. All these naturally help you to pump in more resources to repay debt for which you are paying higher rate of interest.

Negotiate on repayments:

Planned restructuring or consolidation of the loan can also be one of the most effective debt payment strategies. For example, you may look for a bank that helps you with transferring the balance of loans by offering debt consolidation facility. Normally, in such cases you may be offered a lower rate of interest. Alternatively, you can even negotiate with your present banker requesting for restructuring of your loan. In such cases, your banker may even offer you beneficial rate of interest with reduced monthly installments. By doing so, your banker actually entices you to stay with him. See more at Debt Mediators

Do not panic:

In order to become debt free, you need not be a financial expert.  Remember that effective debt repayment strategy largely depends on your planning and implementation. Never panic when you are overwhelmed by debt. Instead stay calm and analyze all your debts and recurring expenses. This can certainly help you to improve your credit score and in the course of time, you can free yourself from the clutches of debts. Check at

Leave a Reply

Your email address will not be published. Required fields are marked *