3 Ways to Stay in Complete Control of your Debt
Debts can spell problems for each individual if they are allowed to spiral out of control. However, it is worthy to note that with the right mind set and discipline, taking out a loan is not necessarily a bad thing.
Below are some tips from iMoney to help you manage your debts well.
Do Not Over Borrow
Calculate your borrowing power. Do your sums and quantify your borrowing capacity based on your current income and expenses. Do not borrow based on an expected future income, as things might not turn out as expected. Some banks and authorities in the Philippines recommend that Filipinos do not exceed a Debt Service Ratio (DSR) of 30%. The DSR is calculated as (all your debt repayment obligation] divided by [your take-home income].
More often than not, people make the mistake of over borrowing money. Discipline yourself and borrow money that is just enough and that is within your budget. Here’s an example:
In case your monthly income is around PHP 8,000 – 10,000, you should not be spending more than PHP 2,400-3,000 to pay down your debts.
Minimise Credit Card Fees Where Possible
If you are a credit card holder and you use it often, focus on settling your entire credit card bill on time to minimize credit card fees and interest charges.
In addition to that, be extra careful when you buy something with your credit card. As much as possible, only use your credit card if there are 0% instalment plans provided by the store or the seller. If not then you should try to look for other sellers that sell the same item you want that could provide interest-free instalment schemes.
Keep a Budgeting Habit
Make a monthly expense plan and stick with it. Discipline is crucial, and goes a long way towards long term financial management. If you have debt obligations, pay them off immediately after receiving your monthly salary.
Solved your debt problems, but still suffering from a low credit score? Follow these steps to improve your credit rating.