Stuck In A Credit Card Debt Trap? Four strategies to get out of the debt trap
New Delhi: We all must have come across phrases like credit cards are pocket tools, they encourage overspending, they invite debt traps etc., right? But, only real life situations teach us the hard lessons. More often than not, the enticing offers and discounts offered by credit card issuers and merchant partners are the perfect bait for credit card users who lack financial discipline, as these people are likely to give in to the money. want to spend too much just for the sake of the deals. . Eventually, such cravings become the root cause of the fact that many people do not pay back all of their dues on time and gradually fall into the debt trap.
For those who cannot repay their dues on time, opting for the EMI conversion facility should be the first option to escape the credit card debt trap. However, you can also explore other financing options in case the interest rate charged on the EMI conversion option is the highest.
Credit card balance transfer
Many card issuers are extending the balance transfer option to existing cardholders of other credit card issuers. This allows you to transfer the outstanding balance to another credit card issuer, at a relatively low or zero interest rate for a predetermined period, usually up to three months. This specific period is commonly referred to as the promotional interest period. Credit card issuers start charging usual finance charges on the unpaid portion of the transferred amount after the promotional interest period has ended. Therefore, the balance transfer option would be suitable for cardholders with the ability to repay unpaid credit card contributions within the specified promotional interest period.
Some credit card issuers also allow conversion of transferred balance to EMI. This option would be particularly suitable for those who do not have the capacity to repay the entire balance during the promotional interest period.
Discover alternative credit options
Credit card holders can also benefit from a personal loan, a complementary home loan and a gold loan to get out of the debt trap. The interest rate charged by lenders on these loan options is usually lower than the rates charged on EMI credit card conversions. A reduced interest cost can increase your chances of getting rid of a debt trap.
Convert outstanding balance to EMI
Many credit card issuers offer the option to convert your pending contributions to EMI. This way, you can repay the full amount in smaller chunks, over an extended period, depending on your repayment capacity.
Note that most banks will charge an interest rate for converting your unpaid amount, which will become part of your IMEs. However, that interest rate on IMEs is likely to be much lower than the finance charge on your unpaid contributions.
The interest rate may vary, however, depending on the mandate you choose to repay the outstanding amount through IMEs. Always try to choose the shortest possible term based on your repayment capacity in order to reduce your interest expense.
Take out a personal loan at a lower interest rate
Another option is to take out a personal loan to pay off your credit card dues. This can be especially helpful for those with significant credit card debt. Usually, credit card providers charge an interest rate of around 40% per annum, while you can get a personal loan starting at an interest rate of around 11%.