Festivals in India are not only about celebration, but it also means lots of shopping, buying etc. To encash the festive mood, and to attract the customers, brands also run various schemes like discounts and cashbacks.
While credit card or equated monthly installment (EMI) options available give a sort of a financial freedom, many times the consumers go overboard with their shopping spree, and that’s why one can witness a spike in credit card statement and lots of unpaid bills.
Hence, effective management of EMI becomes crucial. Financial experts say that if individuals pay their EMIs strategically, they can end up saving money.
Here are the strategies to avoid a debt trap while managing EMIs during festive season:
Keep monthly debt obligations at less than 50 percent
In a conversation with CNBC-TV18, Amit Chaturvedi – Co-Founder Paytail said that ideally the monthly debt obligations should be kept at less than 50 percent (of the incoming cash flow) and one should never ever compromise on his/her monthly savings.
“Instead of buying on credit card, individuals can choose better alternates like no cost EMI. What should also be kept in mind is that post the purchase, customers plan to pay the debt obligations in a defined and definite manner,” Chaturvedi said.
Avoid credit card rollover
Chaturvedi further suggested one to avoid credit card rollover as it attracts very high interest/charges.
Use no cost EMI or easy EMI options
Chaturvedi said that no cost EMI or easy
EMI options is a preferred way to buy, as it not only saves on the interest part, but also pays off the debt in small amounts thus being friendly. on pocket
Avoid funding luxuries beyond needs
According to Zafar Imam, CEO, FinShell, one should avoid funding luxuries beyond needs, especially during
festive seasons.
“Lenders come up with attractive offers to lure new customers during festivals. It is important to be cautious while choosing any such offer as individuals will be required to repay these debts on time,” Imam said.
Avoid late payments in all cases
The thumb rule to follow in paying off debts, Imam said, is to avoid delays and late payments. Failing to do this leads to the added financial burden of late fees, penal interest, etc.
"Timely
repayment of EMIs or loans also helps in keeping interest rates lower for any future requirements," he said.
Understand what to focus first
In a conversation with CNBC-TV18, Anshuman Narain, Vice President, CashBean, PC Financials Services said that understanding what to focus on first is crucial to EMI strategic management.
In addition to the monthly loan payments, Narain said that one can strive to return somewhat more on loans with higher interest rates, such as credit cards and personal loans.
“However, large-ticket loans with tax advantages, such as home loans, can be repaid on time. As a result, this method can help individuals in saving money on interest and get out of debt sooner,” Narain said.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
(Edited by : Aditi Gautam)
First Published: Oct 28, 2021 5:51 PM IST
