Mistakes to Avoid When Paying Off Debts in the UAE
Debts can cripple a person financially and emotionally in some cases. Be it personal loans or credit card in UAE, it doesn’t matter the type of debt or debts you have. All you have to know is that you are bounded to the creditors.
Paying off your debts will not only set you free but also improve your credit score.
While every debtor is eager to pay off their debts, it is no secret that repaying a debt is not easy. Especially, considering the fact that some, if not most, debtors end up making mistakes while repaying the debt.
Mistakes which end up having a heavy impact on the debts.
Therefore, we have listed a few common mistakes made by debtors that should be avoided at all costs.
No Payoff Plans
One of the biggest mistakes when dealing with debts is to not have a proper payoff plan. Having knowledge of the debt is not enough when it comes to repayment of debts. You should have a specific plan and goal to deal with the debt.
You should be clear on the following issue:
- Debts that you would like to clear first:Decide whether you want to clear the lowest debt amount first or the highest debt amount.
- Debts that you would like to clear early: Paying off the debt early won’t turn out to be beneficial always. Always check the early debt repayment fees first.
- EMIs that you can afford to pay:Make sure to factor in monthly expenses, when calculating EMIs. It would only cause you trouble if you pay more than you can afford to.
- Total debt to be repaid:Make a complete list of how much you owe and to whom you owe.
Spreading Too Much
When it comes to debt repayment, debtors tend to repay some extra amount to all creditors whenever possible. It is not necessarily a good idea. Avoid following this process.
Instead, what you can do is select any creditor you would like to repay first. Pay the extra amount to that creditor while paying the minimum amount possible to other creditors. This will help you eliminate one of your debt in full ASAP.
If you are not up for this process, you can always go for the consolidation of debts. This will help you bring your debts under one roof, making it easier for you to comprehend and handle.
When it comes to consolidation of the debt, select a bank that offers you the best terms. Compare the terms online before opting for a particular bank.
No Tracking of the Progress
Debtors should always keep a track of the debts being repaid. It will help in keeping your motivation high. You will find yourself working extra hard to pay off the debts when you see it declining.
Keeping a track of your progress will also help you figure out if you are lacking in progress. It will also help in figuring out if the interest is taking most of your money. In which case, you can look for alternative options.
It will help you to understand where you stand with your finances. Whether you should look for lower interest rates, raise the EMIs or declare bankruptcy in extreme cases.
Debt Repayment with No Funds for Rainy Days
It is a bit difficult to save for rainy days when you are in over your head with debts. But having an emergency fund is important.
An emergency fund will not only help you when an emergency arises, but it will also help you not to fall further into debt. After all, one can never predict when the extreme need for money might arise.
What if you have paid almost all of your debt but a sudden situation arises where you need finance. What if you are ever stuck in this situation and you don’t have any emergency savings. You will only end up ruining your efforts and get further into debt.
To make sure that situations like these don’t end up crippling you, save even a few amounts for an emergency.
Getting Deeper into Debt
Although emergency funds can help you in urgent situations, there is another factor that can get you further in debt. It is none other than your credit card. Swiping your credit card is easy but it has repercussions.
Each swipe of your credit card can land you in debt if you don’t pay back the debt on time. As it is, credit cards have a high rate of interest on delayed payment.
It is better to avoid swiping your credit card if you are not confident enough with paying the bill within every billing cycle. Avoiding to pay or paying the minimum balance will only result in you getting further into debt.
You will only end up digging yourself a bigger hole if you swipe your credit card without a proper plan.
Over to You
Most people in debt do not comprehend that a specific plan is important when it comes to dealing with debt.
Repayment of debt is a necessary evil that everybody would like to get rid of ASAP.
Avoiding to make the mistakes listed above is a good start. If you follow the advice given above, you are increasing the chance of success with repayment of your debt.
Also, avoid repaying your debt with Credit Card in UAE. You will only be getting yourself in further trouble by using a Credit Card in UAE for debt repayment.