credit card: how to effectively manage credit card loans and expenses

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Prafull has been negligent in his spending habits and has incurred a huge debt which he is unable to repay. He has multiple credit cards on which he has hit maximum credit limits, he has outstanding EMIs on purchased electronics, and has even borrowed from friends and family. He makes random refunds whenever he has money. Prafull realizes he is in trouble and has to deal with the situation, but doesn’t know where to start.


Prafull must take corrective action immediately. Being deeply in debt and unable to meet obligations will not only affect one’s creditworthiness, but also other important aspects of life, such as saving for goals and investments.

He must start by getting a clear picture of all the money he owes. He should make a list of all his debts, amount owed, interest payable and other details such as minimum amount or EMI due each month and penalties for delays and defaults. Having this information at hand will help him better plan his repayments. He will be able to set his budget in such a way that the minimum monthly obligations on his debts are taken care of. Knowing what he owes will also help him make decisions such as whether to transfer his credit card balance to a low-interest card or to a card with the option to pay off the outstanding balance through credit cards. EMI.

Next, Prafull will need to exercise discipline and control his current spending habits. He must not contract any more debts as long as his past balances are not regulated. This includes the use of the credit card. Using only cash will prevent him from increasing his debt and limit his expenses.

Prafull’s spending and saving plan should be realistic and achievable. His repayment plan should have a deadline by which he will be debt free. It’s good if he sets short-term goals. Achieving them will keep him motivated and he will see his debt decrease. Living on a tight budget as he pays off his existing debt should give him the discipline to live within his income limits and prioritize his spending even after eliminating debt from his life.

(Content on this page is courtesy of the Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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