Being on your own and becoming absolutely debt-free in today’s world are very daunting tasks but are also equally critical for every household in order to lead a good life with a promising financial future. Most of us are looking for viable solutions to avoid or get rid of the constant financial stress which includes income, savings and debt along with its repayment. We have figured out that the real problem isn’t the bank balance or the amount an individual earns in a month, but it is about the big dreams one gives up, while availing and staying debt-ridden.

In order to ease you out a little and make things simple, we have curated a few smart tips that might help you get rid of that unwanted debt baggage, let’s go through them:

1. Financial reality check

When we talk about debt in all of its forms, we must be aware that not all debt can be considered as bad debt. For example, if we talk about the loans availed in order to build or buy assets, or for skill enhancement can be considered as good loans as they will only add to the net worth of that individual. However, in another case where close to half of the income goes into paying instalments and another quarter of the income is going towards the payment of other EMIs of non-mortgage loans and miscellaneous spending, it’s definitely a cause for concern.

2. Prioritize Repayments

For those who have availed multiple loans shall prioritize there debt repayment as per their role in the overall planning. To start with, first make a list of all the existing loans and then decide which one of these are expensive than the others. Once the priority is set, one can start by repaying the costliest loan, such as the outstanding credit card bills and personal loans. Amongst all that can be considered as debt, credit cards are the most expensive, wherein the interest rates are as high as 40.00% per annum. If it is difficult to accommodate the payment within the budget, one should probably ask their bank to convert it into a personal loan.

Nowadays, most of the banks let customers pay for the large purchases in 6 – 12 EMIs. If the sum is even bigger, they may even extend the payment to 24 months. However, even that personal loan will be costly, with the interest rate of around 15 – 18.00% per annum. Nevertheless, the amount you pay now will be lesser than the one paid for rolling over the credit card balance.

3. Consolidate debt

Debt consolidation does not necessarily mean that an individual accumulated all of their existing debt in to one account. It can also be perceived as if some loans are cheaper it makes good sense to utilize them to bring down the entire interest cost. To do so, one can make use of a Loan against Property (LAP) which is available at 16-17.00% per annum. This might be cheaper than any of the personal loan or a credit card rollover.

4. Increase repayment with additional income

For those who wish to build a good corpus over their employment journey shall focus on this particular way of reducing the debt obligation. It is just one simple way through which one can repay their costly loans faster is to increase the repayment amount whenever possible or at the time of every rise one gets in their income. Most people underestimate the impact of this modest increase but it pays good returns. Even a small increment in the EMI can considerably reduce the number of EMIs one is expected to pay over the loan repayment tenure.

5. Liquidate low-yield investments

Many people have significant investments whether in the stocks or in mutual funds. As volatility is in the basic nature of the markets, there are always opportunities when one can liquidate their holding and get a good return. So it is a smart way to bring down the debt by booking profits on such stock investments or gold holdings whenever the time is right. Similarly, there is an option to liquidate other low-yield investments to pay for high-cost debt. For example, if the interest rate that is earned on a bank fixed deposit is almost half of the personal loan interest rate, it surely makes sense to liquidate the FD and repay the loan.

6. Change in lifestyle

Most of the times when we are already under a lot of confusion and uncertainty regarding our finances we do not pay much attention to the basics. In a similar way, we under-estimate the small efforts while accumulating wealth. A small change in our daily activities or the way we live can create a huge impact by the means of extra savings being turned into investments. It is very often that these little things go a long way in keeping the finances in a fine fettle. Careful planning and a disciplined attitude can help in getting a way out of any debt.