How to Manage Debt effectively

If you are looking for an effective way of debt management, you are at the right place, where we are going to talk about some effective tips which can help you manage your debt efficiently.

There is a common misconception that debt is bad. Well, this is not 100% right, as sometimes you need debt to fulfil some dreams. For example, let’s say you are planning to buy a house or looking to fund your kids’ education.  These are high value stuff and may be self-financing can’t work here.

And so, in such cases you may need to take some loans, and these are not bad at all. In fact, you are doing for the right thing. The kid’s education will be a great investment while for a home, it’s like a dream come true. The only thing you should take care here is – these loans are not becoming your liability.

Now let’s start and talk about some of the effective tips to manage your debt effectively-

#1. Take a control to your accounts first

Well, this is the first step in managing your debt. Gather all your loan account and see where those are, how much is pending, what’s the monthly EMIs and which all are being paid on time.

Maybe a good idea can be to create a spreadsheet where you can write all these along with the rate of interest and have a total EMI calculated that you need to pay on monthly basis.

#2. Check your credit report

This is another important point to check. Credit score is an important parameter which decide many things in finance and credit, especially – how much interest rate you will be getting, how much loan you can get, etc.

If you have a good credit score, you can easily get loan that too at lower interest rate compared to others. But if you have messed up your credit history, then this becomes difficult. The good thing is, nowadays, there are many financial institutions or companies which offers loan for bad credit score people also at a competitive interest rate. You can check more on this here.

#3. Loan consolidation

Well, this is a debatable topic where whether you should consolidate your loan or not but most time, this works. Let’s say you have 4-5 loan account, and you are missing deadlines, which in turn impacting your credit history. Then it makes sense to combine all those accounts and pay EMI for a single one. This way, keeping track on the debt becomes easy, and you will be knowing how things are at your end all at one place.

#4. Find out how much you have to pay or spend

Another important one where you should identify what is your monthly spending including EMIs. If you are unable to get that, you might not been able to understand how much you are earning vs what is your spend per month. A good idea can be to create a expense sheet where put down your earning vs spend and then cut the spend which are not necessary.


Apart from all these, a couple of additional debt reducing strategy can be –

  •       pay off balances with the highest interest rates first
  •       pay off the lowest balances first

Benefit of first is, you will end up paying less while for 2nd it is, mentally you will be like you have less burden.