What is Debt Rescheduling – Dealing with increasing debt
What is Debt Rescheduling - Dealing with increasing debt
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Mostly people don’t prefer debt but some people do, even if they have enough funds to meet obligations. In both cases debt rescheduling is necessary because no matter what the reason of going for debt might be, if not managed properly it might ruin the complete financial structure of an individual.
Now to use debt and still not be affected by using debt, ain’t that a superpower?
While opting in for debt the tenor should be decided keeping in mind the repayment capacity of the borrower, shorter the tenor of the loan ; more will be the periodic repayment putting pressure on available income even if the cost of debt is low.
How to deal with increasing debt?
- Debt Ranking - Dealing with the costliest debt first and knowing which debt option is costing how much is the first step to climb the ladder of being the debt king. Usually credit card dues and personal loans taken end up being the most expensive. The debt that provides tax benefits such as education loans or home loans can be dealt with later.
- Purpose of Debt - When a loan is taken for buying an asset then such asset can be sold in order to get out of the debt trap considering the any pre payment charges that might be imposed.
- Re-Financing - A lower cost loan can be used to nullify the loan that costs more. One example of such refinancing is the credit card balance transfers.
- Extension of Tenor - The possibility of extending the tenor of the loan can be explored since it can reduce the monthly outgo in debt servicing but as the time period increases it will also lead to rise in interest to be paid on the loan amount.
- Revised Loan Schedule - This option is the last resort as it involves informing the lender about the problem asking for a revised schedule which highly affects the borrowers capacity to get loans in the future.
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@Gourav__Ahuja
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