Actionable steps to relieve credit card outstanding

Actionable steps to relieve credit card outstanding

In the modern times that we live in, life is quite unimaginable without credit and credit cards. If used prudently, credit cards can prove to be great tools for building a credit record and improving your CIBIL score. On the other hand, if used carelessly, they can also turn out to be potential debt traps that can bring your credit score crashing down. Given how easy credit cards are to use, people often do not realize that they are going overboard and the realization strikes when an SMS or the credit card bill flashes the outstanding amount. If you are breaking out in cold sweat because you have already spent beyond your means on your credit card and are in a mess of a debt pile that seems unmanageable at the moment, here is help at hand.

Take stock of the situation

When things go wrong with credit card usage, the natural reaction is to feel scared. But that as you already know that will not solve the problem you have at hand, so it’s best to take the bull by the horns. Open up your credit card bill and take stock of the exact outstanding amount and write down the debt and the interest component. The next thing you need to do is, stop using the credit cards till you have paid off your debt, so lock away your cards until you have paid your entire debt, so that you do not succumb to the temptation of using them.

Chalk out a repayment plan

This is a very important exercise you must carry out when you are trying to repay your credit card debt.  Apart from your credit card debt, make a list of all your debt you are servicing, your home loan or car loan and other fixed expenses. The next thing you need to do is make a budget that will take care of all your fixed expenses. Financial prudence says that you need to pay off the loan that carries the highest rate of interest, so your credit card loan will feature right at the top of the list. But you cannot skip payments on your home loan and other loans as well as it will be detrimental to your CIBIL score. You need to keep making regular and timely payments on your other loan to keep increasing your CIBIL score.

Create a monthly spending plan

If you have gotten yourself into a critical debt situation it goes in without saying that you need to cut corners to pay it all off. Only when you pay off your outstanding debt on your credit card and maintain a good track record of repayments on the other credit lines that you have availed of will you be successful in enhancing your credit score. In order to do so you need to take a good look at all your monthly expenses and see what are the things you can do without. If you really give it a good thought and decide to live on the basics, chances are you will end up freeing up some cash that can be directed towards the repayment of your debt.

A strategic approach                   

Some financial pundits advocate taking a strategic approach while repaying credit card debt. This is applicable in case you have built up debt pile on multiple credit cards. After paying your fixed expenses for the month that includes you home loan and your car loan, make the maximum payments on the cards that carry a higher rate of interest and the minimum amount on the cards that carry a lower rate of interest. This approach will help you save money as well as help you pay off your credit card debt faster.

Dip into your savings

Financial prudence advocates that you have an emergency fund that takes care of your expenses for at least three to six months. If you have some money saved in an emergency fund, consider using a part of it to repay the expensive credit card debt. Also direct all other extra cash that comes your way in the form of income tax refunds, bonuses and cash gifts towards the repayment of your credit card debt.

A debt consolidation plan

If nothing seems to be working out for you and you find yourself stressed about how to repay your credit card debt and how to increase CIBIL points, think of a debt consolidation plan. A debt consolidation plan is the process of taking one large loan and servicing it rather than repaying multiple loans. However, a debt consolidation plan must be fool proof, and you should not end up with a loan in which you are paying a higher rate of interest than you were paying earlier.

Financial experts are often skeptical about debt consolidation plans because even after taking such loans, people do not change their financial conduct that got them into a debt pile in the first place. So if you are taking a debt consolidation loan, make sure you do not go back on your plan to cut back on your expenses and living on a budget.

If you are at your wits end trying to figure out a way to do things right, you may even approach a credit health platform such as Credit Sudhaar. Here, a team of proficient financial experts can not only help you restore your credit health by giving you the right advice about a repayment plan, they can also chalk out a long term credit improvement roadmap that will boost your credit score in the long run. The road to recovery of your credit health many not be an easy one, but over the long term it will prove to be one of your best financial moves.