Tips For Borrowers To Overcome The Problem Of Debt Trap | Money In Minutes

1. TIPS FOR BORROWERS TO OVERCOME THE PROBLEM OF DEBT TRAP Borrowing money for various reasons has become a common practice for most people in modern times. While a majority of people repay the borrowed money within the given duration, countless others fall short of paying their EMIs regularly. With every missed EMI the outstanding amount starts accumulating as the interest charged on the same. If the situation is not resolved on time, things can get out of control fairly quickly and land the borrowers in what is known as the debt trap. Being in debt can in itself be quite stressful for an individual and when it leads them into a debt trap the situation can become extremely challenging and overwhelming. Discussed below are some effective tips that can help borrowers to overcome this challenge and manage their debts properly. Start By Taking Stock Of The Debt The first step that borrowers can take in the direction of avoiding a debt trap is to take stock of what they owe to whom. They should compile complete details about the EMI’s payable, the interest rate, and the tenure of the individual amounts they have borrowed, including any ​short term loans​. This information helps the borrowers to plan for the proper management of their funds and the repayment schedule, which can, in turn, enable them to avoid the problem of the debt trap. Try To Settle The Most Expensive Debts First Once the borrowers have learned about the key aspects of their various debts, they can easily identify the ones that are proving most expensive for them. The cost of debt can be assessed based on the EMI amount that the borrowers are required to pay as well as the interest rate being charged by the lenders. The higher the value of these two parameters, the costlier the debt will be and put the finances of the borrowers under considerable stress. Any pending loans that have not been paid for a long time and have accumulated a high interest also fall under the category of expensive debts. Paying off these debts first can help borrowers to get their finances somewhat on track. Consider The Option Of Debt Consolidation Most borrowers face the problem of a debt trap as they have to manage multiple loans. Keeping track of several different EMIs to be paid on different dates of each month can easily make the borrowers feel confused and cause them to lose track of one or more payments. By opting for debt consolidation, this problem can be easily overcome as the borrowers would have to manage only a single loan and keep track of a single EMI associated with it. Debt consolidation can also provide the additional benefit of lowering the interest rate to be paid by the borrowers as compared to the combined interest payable on their individual debts. Start Budgeting And Monitoring Every Expense

2. Many times, borrowers are unable to pay their EMIs on time due to their lack of budgeting or their inability to control their expenses. Thus the problem of the debt trap can be easily avoided by the borrowers by investing their time and effort in performing these two activities. This simple step can help the borrowers to take stock of their income and expenditure and reduce their spendings on things that are not too important. Borrowers can also choose to trade off some assets or liquidate some investments to get their finances back on track. Look For Ways To Increase Their Income Borrowers may also consider the option of trying to increase their income to better manage their debts. Taking up a part-time job or turning their hobbies into a source of income are just some ways in which the borrowers can increase their income. The extra earnings can be put to the dedicated use of paying off the EMIs of different loans including a ​Short Term Personal Loan​, a payday loan, or any other debts that they might be having. Seek The Help Of Professional Experts In case the borrowers find themselves incapable of managing their debts efficiently, they might consider seeking the help of professional experts. These experts can be trusted to provide the right advice and guidance to the borrowers to help them overcome the challenge. This might be done by counseling the borrowers about setting a budget and setting expenditure limits or even negotiating with the creditors for restricting the repayment plan. Original Source: https://blog.moneyinminutes.in/tips-for-borrowers-to-overcome-the-problem-of-debt-trap/