How to cut spending and reduce debt on New Years

0


Housing is one of the biggest expenses for most of us. Therefore, those who are on a strict financial diet should explore ways to save something huge on their housing expenses.

Due to the pandemic, times have become financially difficult for us. Financial experts say now is the time to save money by cutting down on all unnecessary spending and focusing on large financial commitments like paying down debt and cutting spending on education etc. It is important to ensure that these financial commitments are systematically respected despite the cash flow. problems.

However, cost-cutting strategies applicable only to discretionary and lifestyle spending may be insufficient to get your finances back on track. Therefore, explore ways to save large sums of money to have an immediate and significant impact, depending on your situation. There are certain steps you can take to avoid accumulating additional debt and save money for essential expenses.

Industry experts say housing is one of the biggest expenses for most of us. Therefore, those who are on a strict financial diet should explore ways to save something huge on their housing expenses.

For example, if you live in a rented house in the middle of a city, you might consider moving to a smaller location on the outskirts of town to increase your savings. Additionally, with the work-from-home scenario, if you are someone currently working in your rented home, experts say these people may explore the possibility of moving in with their parents until finances stabilize, if work allows it.

Switch to a low interest rate loan if you are having difficulty with a high rate loan. These loans include credit card debt, personal loans, etc. Experts say that one can consider switching to a low interest loan such as a securitized loan. With these types of loans, not only will you make your monthly repayments more affordable, but you will also lower your overall interest charge.

For example, taking out a secured loan such as a gold loan or a loan against your FD, vehicle, or endowment plan to pay off your credit card dues can help you settle the dues in one fell swoop while on the go. greatly reducing your interest charge.

Also, instead of taking out a secured loan, you could continue to pay only the minimum amount owed on your credit card, however, this will only be a fraction of the total outstanding amount, something just to keep your account. card active. By opting for an additional loan, you can not only pay your credit card dues in one go, but also use your card for essential and urgent expenses, while avoiding a negative impact on your credit score.

That said, if you’re struggling to repay your MCLR-linked home loan IMEs, experts say you may consider switching to a repo-linked loan offered either by the borrower’s bank or a new one. Bank. Consider this option especially if the rate difference is significant and / or as a borrower you are early on on your loan.

Note that a reduction of 80-100 bps (basis points) could not only lower your IMEs but also significantly reduce the overall long-term interest charge. However, you need to have a credit score above 750-800 to get the best rates. Nonetheless, refinancing a loan involves paperwork and processing fees, and the rates on a repo-linked loan typically increase whenever the Reserve Bank of India (RBI) increases the policy rate in the future.

Financial Express is now on Telegram. Click here to join our channel and stay up to date with the latest news and updates from Biz.


Share.

Comments are closed.