How to Get Rid of Festive Season Loans Faster?

Follow these steps to get rid of the festive loans faster:

1. Know how much you owe:

The first and most crucial step towards managing your debt is knowing how much you owe, the interest component, loan tenure, and other details. Many times borrowers avail of loans without thoroughly understanding the nuances of it and regret it later. A lot of borrowers do not even know the basic details of their debt, especially the personal loans availed during the festive season. To know your debt, list down all your old and new loans, including credit card dues and then make a total. Now, you can assess your income and savings to see how you can manage the loan repayment in the shortest possible duration.

2. Find the loans that you can pre-pay:

After understanding your debts, find out the loans that you can pre-pay (part-pay or foreclose). Most financial experts advise that the loans with a higher rate of interest should be cleared off first as these loans make you spend a huge amount on the interest. Repaying the high-cost loans earlier will save your interest outgo and reduce your financial burden. However, some experts also advise repaying the small amount of loans first as it is easier for borrowers with multiple loans to repay the small loans faster. This also helps manage multiple loans as the number of loans is reduced. You can choose any method of loan repayment at your convenience. However, make sure you check the terms related to pre-closure as the pre-payment and foreclosure charges could be considerably high, depending on the type of loan and lender.

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3. Repay regularly:

While pre-payment and foreclosure can reduce your debt burden, it is equally important to repay your dues i.e., loan EMIs and credit card bills, on or before the due date. If you do not pay your EMIs and credit card dues on time, the lender or the credit card provider will charge you late payment fees. Moreover, the debt gets accumulated with a high rate of interest, which can become challenging to repay later. Hence, ensure you pay all the dues on time to avoid building up the interest component and penalties. If you have recklessly used your credit card during the festive season, you might get tempted to pay only the 'minimum amount due. However, paying only the minimum amount due on the credit card will increase the interest component, and you will end up paying a much higher amount. Therefore, it is essential to timely repay your dues in full. Besides, not paying your dues on time can negatively impact your credit score.

4. Cut down your credit spending:

As discussed earlier, the primary reason why many people overspend and avail of loans during the festive season is that they cannot control the urge to spend as the merchants offer huge discounts on credit purchases. If you are facing a debt burden, it is advisable that you cut down unnecessary expenses and luxuries like expensive dinners and holidays until you pay off all your existing dues and avoid buying expensive stuff, such as clothes, gadgets, etc. It can be hard initially to make such lifestyle changes, but they are worth coming out debt-free.

When you are already under a debt burden, it is important that you do not avail of new loans and control your credit card spending. You might face a cash crunch sometimes, but taking more loans can put you in a state of debt overhang that becomes impossible to come out of it. Such situations can affect the borrower mentally and lead to severe depression or suicidal tendencies. If controlling your credit temptation is difficult for you and you cannot control binge shopping on credit, then do not hesitate to freeze or block your credit cards.

5. Try to increase your earnings:

While increasing your net earnings might not be possible for everyone, you can try to do a side hustle, monetise your hobbies, rent out a property, negotiate for a salary increment, etc. If your spouse is a homemaker, you both can discuss the possible income opportunities among each other to share some load. The extra income you earn can be used to repay your loan earlier, or you can save that amount to foreclose any loan in the future. The increased earnings will help you to reduce your debt-to-income ratio. Apart from this, if you have old high-value loans like education loans, home loans, etc., you can also try to negotiate with your lender on loan terms like reducing the rate of interest, waiving off the pre-payment charges, reducing the loan tenure, etc.

To conclude:

The tips discussed above will help you pay the recently availed festive loans faster and reduce your debt burden. If the chances of making any changes to the newly availed festive loans are less, it makes sense to take the necessary steps to lower the burden of your old loans, ultimately lowering your debt burden. Improving your financial knowledge and controlling your temptations to splurge on credit will help you avoid falling into a debt trap. If you want to experience the luxuries and buy expensive items, start saving and use your savings to finance your splurging. Personal loans and credit cards are supposed to be used only for emergencies. If you are getting better deals on shopping through a credit card, make repayment instantly. It is not advisable to use credit apps for day-to-day needs as such apps can be addictive, and you will create an enormous debt out of small purchases in no time. Controlling and avoiding using credit facilities is the basis of financial discipline.

Warm Regards,
Ketki Jadhav
Content Writer