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The financial impact of Covid-19 stalled global economies and made individuals re-evaluate the terms of financial security they hitherto adhered to. Widespread job losses and pay cuts forced people to dip into their savings, increasing national household debts drastically. A 2020 survey by CGAP found 57% of respondents in India struggling with payments and repayment obligations during the pandemic. Dealing with debt is not a preferred scenario at any time, and the backdrop of a global pandemic may seem to tip the scale against you.
If you have dues and think you may fall behind on payments, you should make a proactive effort to ensure you are not penalised. Consider all of your options, which can include refinancing, negotiating directly with the creditor, or working with a debt counsellor. Let us examine the various options available to you.
1. Contacting Lender(s)
The first thing you could try is to contact your lender(s), be it a bank, a credit card company, or any other institution to whom you owe money, and explain your situation. At the end of the day, your lenders have invested in you and have nothing to gain monetarily by penalising you. So, they could offer you some sort of repayment programme that:
Don’t hesitate to lay bare your financial and employment status before lenders; be honest about how much you are reasonably able to pay based on your income, expenses, and assets.
If you enroll before you miss your due payments (i.e., if you are aware of the state of your finances), you may be spared any negative credit reporting. In other words, your credit score will remain unblemished.
Some key factors to consider:
2. Credit Counselling
Many non-profit and private institutions in India provide counselling to people struggling with debts. However, acquaint yourself with the counselling agency’s terms and conditions. Some banks also provide this service at a nominal charge.
A counsellor can help you with the following:
Working with a credit counsellor may involve a debt management plan and can end up with you taking out a new loan to pay off your old dues.
3. Settlement Companies
You may have come across advertisements from settlement companies offering help through negotiating your debt or other debt relief measures. Some of the services usually offered are:
Remember that debt consolidation does not erase your debt; you might end up paying more interest in the long run.
Debt settlement companies cannot make all your debts disappear. In fact, not all lenders may be willing to negotiate with debt settlement companies. So, beware of companies that say they can eliminate all of your debts because they cannot.
If you seek their services, make sure you understand what their offer is, and the risks associated with them.
4. Beware of Scams
In your desperation to make your losses go away, there is a chance you may fall prey to scam artists. Be wary of people who charge fees upfront or make guarantees about making your debt disappear. A rule of thumb is not to get involved with any debt relief that seems too good to be true.
Dealing with debt can be a stressful process, but it doesn't have to be so. Consider the tips mentioned above to ease the burden of past debts and pave a brighter future for you and your loved ones.
IDFC FIRST Bank provides the facility to transfer balance of your existing personal loans or credit cards at affordable rates. Visit our website or download IDFC FIRST Bank Loans app to know more about our personal loan solutions.
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