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With the ease in loan approvals, more and more people have started availing loans. Even though it eases your finances and helps you lead a better life, these debts can also turn worrisome if you are not financially disciplined to pay off these debts.This is where debt stacking method comes in. The stacking method for debt repayment is considered to be one of the best ways to repay your financial liabilities. Let us understand how it works.
8 Magical Steps to Be Debt-Free
8 Simple Steps For Debt Stacking
Step 1: Say no to any more debts! People are often of the opinion that taking more debts would help them pay off the previous loans, which is actually a debt trap, a vicious cycle. So, distant yourself from any such thoughts that also includes not using credit cards until and unless it’s absolutely necessary. Step 2: Here you need to enlist all your debts in a descending order based on the rate of interest. The rationale behind such an arrangement is to pay off the debts that might increase exponentially over time. Step 3: In the case of credit card dues, you can explore the opportunity of getting a lower interest by shifting to a new bank. In all probability, the new bank may reduce the interest rate in order to take you in as a customer. Step 4: Here, financial frugality is the key. In order to achieve it, you need to segregate your expenses in terms of priority after subtracting the taxes and EMIs from your income. The expenses listed on the least priority ones should be evaluated as to how necessary they are. Positive efforts should be made to reduce or even eliminate them.It is also imperative to determine if you can set aside some amount as savings. The amount you manage to save will be your stack repayment account. Step 5: Never miss out on the minimum instalment that you need to pay every month as it might increase the actual sum through means of late fees. Step 6: Utilise the savings in the stack repayment account to pay off the balances with high-interest rates. Step 7: Tracking your progress, setting short-term and rewarding yourself in the process of achieving these goals are also integral components of developing a debt-repayment habit. Step 8: Once you are done with debts with the highest interest, you can move to the next while following the same drill till you exhaust even the smallest debts.However, it is crucial that you do go hard on yourself in order to pay off the debts as you might end up being frustrated and eventually lose track.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
