How to come out of debt trap by managing your finances well

The first step to take towards moving out of a debt trap is to create a realistic debt repayment plan. This includes noting down all your liabilities including loans, credit card payments and other expenses. 

A debt trap is triggered by a combination of factors such as excess dues and interest rates and the inability to pay back the promised amount. Many people who have taken loans have fallen into a debt trap due to their inability to pay back on time and the vicious cycle it creates. If a person cannot keep up with their financial commitments, there are some ways they can get out of a debt trap. They need to restructure their finances to reduce the burden of debt to ensure that their ability to repay loans does not fall behind their obligations.

Here are some steps that can help you come out of a debt trap by managing your finances:

Create a debt repayment plan: The first step is creating a realistic one. This includes noting down all your liabilities including loans, credit card payments and other expenses. Set aside a portion of your income towards repaying your debt. You can utilise a number of methods according to your preferences and dues such as paying the lowest amount of loan first or paying the obligation with the highest interest rate.

Negotiate lower interest rates:  Try to talk to your lender or bank to renegotiate your debt burden. If you have had a good history of loan repayments or face a difficult financial situation, banks may be willing to negotiate more favourable interest rates or longer loan tenures.

Seek professional advice: If your debt cycle is impacting all areas of your life drastically, it may be a good idea to seek a consultation from any financial expert. Their advice can help you manage your budget in a manner that is more conducive to your loan repayments. Expert advice can also help you negotiate with the lenders in a more informed manner.

Automate payments: One way you can avoid missing out on debt repayment is to set up automatic payments in your bank account. This will help you avoid late fees and better manage your liabilities.

Look for ways to increase your income: You can look for ways to work as a freelancer or take up another part-time job if your employer allows this. This can help increase the money you have in hand to repay your loans.

Reduce credit card payments: If you are caught in a debt cycle, reducing credit card payments is necessary. It will prevent further addition of debt.