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Getting out of debt

Larissa Fernand

You can't figure this one out. All you seem to do is service your loans and pay your bills. You are in a debt trap and you want out. Hopefully these tips will show some light at the end of the tunnel.

• Started revolving credit on one of your cards? Stop making any payments on that card. Each and every single payment will get caught in the revolving credit. Start using cash or another credit card.
• The interest on the card is killing you. Switch cards. Opt for any of the other cards, like the Amex, ICICI or Stanchart card, which offer a low rate of interest for six months (if you transfer debt). Transfer all your debt onto this card and stick to the date of six months to clear your outstandings.
• Alright. You are in a soup. You are revolving credit on all your cards. Consolidate your debt. Opt for a personal loan and repay all the other loans. Then focus on servicing just this one loan. The personal loan will be cheaper to service than revolving credit.
• List all your inflows (salary, interest, dividends, rent earnings, gifts, windfalls, bonus, LTA) and outflows (money spent every month). The inflows should be more than the outflows or at least match them if you are steeped in debt. If outflows are more than inflows, start cutting down. Here's how: Don't stop payments on electricity bills, water bills, telephone bills, gas bills, doctor/ dentist/ chemist bills, children's school fees, insurance premia, household help, house rentals or loan repayments. Keep money aside for taxes and sudden expenditure like an illness or a repair job. Cut down on your newspaper bills (you can do away with one or two of the international publications for some time), clothing and footwear. Knock out CDs, video cassettes, LCDs, books, holidays, gifts, impulsive buys, eating in expensive place and consuming alcohol. Keep entertainment to the bare minimum.
• Leave home without your credit card. That will stop you from using it. Tear up your ATM card. Don't keep much money in the savings account except what is needed for your monthly expenditure. Put the rest in bank fixed deposits so should an emergency arise you can just break the deposit. And do not keep spare cash at home.

Do you have any tips you would like to share?