It doesn’t matter how much loan or debt you have on your name, but making a goal to get out of these debts is a big thing to achieve. To achieve your goal you should apply right kind of strategies and plans to pay off your debt.
Most of the people end up losing their goals by making wrong decisions. A good strategy and self-discipline is really important to pay off your debts without making any hole into your overall budget. Making all payments of your outstanding debts or using your savings to get rid of your loan is not a wise idea. Here are five hazardous ways you should avoid to pay off your debts.
Paying off credit card debt too fast: If you use credit card for all financial transactions, for paying bills, etc., and decide to clear your credit card debt by making one big payment to clear all debt, you will enjoy the satisfaction of clear credit balance for a while. But there are chances that you will mount new debt very soon. If your credit card spending are reckless and you spend a lot via your credit card, the best option to reduce your debt is; change your spending habits. You should avoid using credit card for making every payment, rather use your debit card to keep a tap on your spending. So making the payments against your outstanding bill in one go is not the solution, but using it wisely should be your ultimate goal.
Using emergency funds: This is another big decision which you should never take to pay off your debts. You should never use your emergency funds to pay off your bill until you are not badly trapped in debt or you are not in really emergency situation. If you will use your emergency funds to pay off your debt, you will have to deal with financial instability when faced with medical bills, another situation, which requires instant cash flow. Stop the temptation to use your savings to pay off your debt for getting small time relief. Rather, you should look for ways to earn more money or to save more money to pay off your debt faster.
Taking a secured loan to pay off your credit card debt: Taking a gold loan, loan against property or using or mutual funds to pay off your credit card debt is not a smart choice. You should not take such secured loans to gain short-term satisfaction. Gold and property are your hard-earned assets and you should not mortgage them for securing a loan to pay off your debt. This will increase your burden as you will be under pressure to get your assets back from the bank or the financial firms. Avoid taking a loan for longer period unless you are not facing a situation, which is totally out of control.
Withdrawing cash from your PPF/FD: Are you thinking to make all outstanding payments in one go by using cash from your PPF and FD? These are your saving for future with some financial goals. You should not use these funds to make payments against your mounting amount of credit card.
Going for debt settlement: Going for debt settlement means you will talk with bank officials to close your loan for taking a certain amount rather taking the actual interest and principal amount outstanding. This will give you peace of mind as you will make a debt settlement by making lower payment. Settling a loan for a huge amount is not really smart move as it will affect your CIBIL score. Bank will put you in negative score and in the future you might face problems in borrowing loan from any bank.