Beginner's Guide to Debt Management

Points clés

• Debt is a claim on your future income, and interest is the price you pay for using money before you have earned it.
• For every debt, write down the lender, balance, annual rate, minimum payment and due date, because you cannot manage what you have not listed.
• Paying only the minimum keeps an account in good standing but mostly feeds interest, so every rupee above it goes straight to shrinking what you owe.
• Protect every minimum payment first, stop adding to any balance that is growing, then send your spare money to one chosen debt.
• Call your lender before you miss a payment, not after, and treat any offer of instant, no-questions credit as a warning sign.

À l'intérieur de ce bit

1. What debt actually is

   Debt is money you use today and promise to repay from money you have not earned yet. Every loan, credit card balance or instalment plan is a claim on part of your future pay.

2. The words printed on every loan

   Loan papers repeat a small set of words. The principal is the amount you borrowed.

3. How interest keeps a balance alive

   Interest on a credit card is added to whatever you have not paid, and next month interest is charged on that larger amount. This is compounding working against you.

4. Your first three moves

   The first move is to make a list. Gather every statement and app and write one line per debt: who you owe, how much, the annual rate, the minimum payment and the due date.

5. Mistakes that make debt heavier

   Beginners rarely get into trouble through one big decision. It is usually a handful of small habits.

6. Asking for help before you fall behind

   If you can see that next month's payment will not fit, call the lender before the due date. Lenders usually have more options for a customer who rings early than for one who has already missed payments.