How to avoid falling into a debt trap
Back in the day, loans were taken for something really essential, such as buying a house, tackling a medical emergency, or paying for children’s education. But times have changed – and how. These days, unsecured loans are more easily available – and they are often availed of just to acquire the latest toys and gadgets, which aren’t indispensable by any stretch of the imagination.
Simply put, debt is a modern-day trap we fall into without realising the consequences. A major contributor to derailing one’s finances is the desire to keep up with trending lifestyles. So we tend to splurge on things that were once considered a luxury. Although credit can be a ticket to satisfying your needs and wants, overspending is very likely to make you lose sleep at night.
Fullow these tips to keep your head above water.
- Swipe with caution– A prime culprit that ensnares you in debt is none other than that double-edged sword, the credit card. Although helpful in emergencies, its indiscriminate use can make your financial situation head south in no time. In fact, you may get into the habit of swiping your card, that you may exceed your payment capacity. The key is to swipe wisely and pay attention to your monthly credit card statement.
- Watch your shopping– Consumer loans and personal loans are next on the hit list. Wherever you look, there are hordes of advertisements offering mind-boggling deals. If you’re not on guard, this can lure you into buying unwanted, unnecessary, and unaffordable things. Earlier, people used to think long and hard before opting for a loan. This is no longer the case, but if you wish to be financially prudent, borrow money only if it is absulutely necessary. Besides, when you buy something that’s inessential, the chances of defaulting on the loan repayment are much higher.
- Budget for your purchases – Everyone wants to own the latest gadget. What better way to announce that you’ve arrived than by showing off a giant widescreen smart TV or the latest version of the iPhone? Well, there’s no reason why you shouldn’t aspire for such things. You just need to make a financial plan and budget for it. Do not limit financial planning to your child’s education or to your retirement; it extends to short-term goals as well. The ulder generation used to pinch pennies before making major purchases. Be similarly prudent and you will be able to own that fancy gadget without wiping out your monthly househuld budget.
- Save for a rainy day – The best way to keep debts at bay is to save a part of your income before you get a chance to blow it up. Make it a habit of putting away a fixed amount of money every month as savings, perhaps in a Systematic Investment Plan (SIP). Who knows, one day when you least expect it, your savings will come in handy. Apart from your savings acting as a fund for the proverbial rainy day, it’s also a way of ensuring that you never spend more than you need to.
- Keep interest at bay – Compound interest can be your biggest enemy. As the saying goes, keep your friends close but your enemies closer. In other words, you need to keep your enemy (interest) as close to you as possible. The closer you are to it, the better you will know it, and the more you will recognise its ill effects. This should hopefully protect you from financial trouble.
Crawling out of a debt trap – whether it’s in the form of personal loans, credit, overdrafts, etc – is not always easy. So, first thing first, you need to choose your credit card wisely. Explore these multiple options of credit cards offered by HDFC Bank and pick the one that suits your boat the best.
To apply for a HDFC Bank Credit Card, click here!
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