Smart Tips to Manage Debts of Any Size

Everybody gets some kind of debt at some point in their life. Debts are necessary to fulfil many of your life dreams and necessities. A lot of thought and process goes in while getting a debt. The same amount of effort should be put into managing your debt.

Not managing your debt cautiously can lead to many unfortunate events. You might end up with huge interest accrual; it will result in a bad credit score for you; in extreme cases, it could even lead to bankruptcy.

If you want to avoid this unpleasantness, then you need to learn the smart way to manage your debts.

Keep track of all your debts

The first and foremost step in debt management is to be up to date with everything about your debt. Make a detailed note of your debts; the loan amount, interest rate, repayment tenure, monthly EMI and the EMI debit date every month. This information may be trivial but is of utmost importance in debt management. Having all this information handy will help you to budget and set aside your monthly income for debt payments accordingly. Also, having a snapshot of all your debt in one place allows you to see the bigger picture and be aware of your credit standing. Ensure to update this list regularly as and when you make some repayment.

Don’t miss your bill payment due dates

Make it a habit to pay bills a few days in advance so that you don’t miss the due dates. Many people have the bad habit of keeping the bills till the last date to make payment. This is not a healthy habit. What if you forget to pay or the online transaction fails? You may end up on the defaulter list and will have to pay unnecessary late payment charges. Defaulting is also not good for your credit score. You could use simple hacks like setting up reminders on your smartphone to remind you about bill due dates. You can also set up standing instructions or auto-debit for automatic payment of bills.

Create a monthly budget

When you feel overwhelmed with your debt, it is high time that you budget your monthly earnings. Note down your income, expenses and debt liabilities so that you determine how much to pay towards each header. It is always advisable to pay off high-interest debts first. So, personal loans and credit cards come first on the list. Make sure that you make regular payments into every account to avoid defaults.

Make sure to pay at least the minimum due amount

Make the minimum payment if you can’t afford to pay anything extra. Just paying the minimum payment may not help you in paying off your debt but it does, however, keep your account in good standing, preventing late fees. When you miss payments, it becomes more difficult to catch up, and your accounts will ultimately default.

Try and pay off smaller debts first

Once you have budgeted everything, you might get overwhelmed by the figures. Don’t be! Figure out the smallest debts and pay them off first. Striking down debts off your list will give you the confidence and the much-needed boost to keep you going.

Start tackling larger debts

Once you’ve paid off your smaller bills, concentrate on dealing with your larger debts. We suggest using the debt avalanche process, which entails paying the minimum amount on each bill and only using the remaining funds to pay off the debt with the highest interest rate. Every month, interest charges add to your debt, so avoiding the worst bill will put money back in your wallet. This strategy allows you to retain more of your monthly earnings, which improves your ability to make greater debt payments.

Go for debt consolidation or debt restructuring

When you realize that you are over your head in debts, it is smart to ask for help. Go to your lender and request them for debt consolidation or debt restructuring.

If you have an Emergency Fund, utilize it

Many of us have an emergency fund to fall back on in times of needs. It might be a good idea to break it open now. We did work hard towards creating that fund but using it now is better than paying unnecessary late fees and other penalties. You should use those funds to pay off the loans and you can start saving soon again.

Do not apply for any new credit

Never go seeking out another loan to pay off the existing loans. For one, you may not get a new loan because of your existing loans. Even if you get one, the interest rate will be very high owing to your existing liabilities. You will only be complicating your debt situation. It is better to manage the existing debts rather than seeking new ones.

Realize and accept when you are in dire need of help

In spite of all the above steps, if you are still unable to manage your debts, it’s time for you to seek professional help. You can approach a debt relief company or a credit counselling company that will help you manage your debt professionally, for a small fee. There is nothing wrong with seeking professional help when you know that the situation has gone beyond your control.


Debt is a risky business. We all want to be star borrowers by making timely repayments but some of us end up as a ‘bad debt’ in the lender’s books. Debt management is a conscious process that goes on till the last penny of your debt is repaid. The key to debt management is “disciplined money management”.

Remember, never borrow more than what you can afford. It is always better to save for your needs instead of going the easy way and getting a loan. Learn to put a hold on that new smartphone or the expensive watch. Spend only for your needs, not your wants!