Spend, Save and Invest Smartly
You must have seen an advertisement on television showing how important a Cibil score can be to your financial well being. A big businessman is kept waiting at a bank as he applies for a loan. A salaried employee shows off his Cibil score of 750. He is immediately called by the bank manager and his loan is sanctioned. The businessman watches this with amazement.
This advertisement shows how important a Cibil score is to get your loans sanctioned. A home is very important today not only because of the security it provides (both financial and physical) but also helps you to find a bride. A bad Cibil score means your all important home loan will not be sanctioned and this can severely affect your future.You must improve your Cibil score.
Festive seasons mean splurging on mobiles (The iphone 6 has recently been launched), fashionable clothes , laptops, two wheelers and cars.( A number of models have recently been launched just to catch you in the festive season).
Buy a mobile worth INR 10000 and you get a travelling bag free. Well you thought of buying one for just INR 7000 but now well….Just INR 3000 more and you get the travelling bag. But should you buy a mobile phone of INR 10000 just for the travelling bag?
Festive seasons have discounts and offers (Marketing gimmicks to make you loosen your purse strings). Festive spending can throw your finances out of gear for several months. You keep swiping your credit card and before you know it you have spent far more than you intend. Debt is a trap which you set and bait yourself and then deliberately gets into.
Plan your shopping for festivals much in advance and buy only what you need. Do not fall for a bargain. A bargain is something you can’t use at a price you can’t resist.
Remember: If you buy things you don’t need you will soon sell things you need.
EMI (Equated monthly installments) can be a savior if you are in a severe credit card debt. You can convert your credit card debt into a personal loan. Banks offer such a facility and interest rates are lower for a personal loan compared to interest charged on credit card debts.You pay off your EMI’s on the personal loan and soon your Cibil score is back on track.Keep an eye on your credit card
You are assigned a credit limit (Basically the amount you can borrow using a credit card) based on your salary and certain eligibility criteria.
If your credit limit is INR 75000 a month should you regularly spend INR 60000 each month and carry over your debts? Even though you are well within your credit limit of INR 75000 compare yourself with your friend who has a similar credit limit but spends only INR 30000 a month using his credit card. Can both of you have the same Cibil score?
Obviously not .Your Cibil score will be much lower than your friends (Rated on a scale of 300-900).Remember.... higher the Cibil score (>750) better are your chances to get your loans sanctioned.
Remember: Keep your credit card usage well within your credit limit. Too many credit cards You apply for credit cards in a number of banks. The banks view you as credit hungry (You are not able to live within your means).You are a poor handler of your finances/money is how banks see you. It is also difficult to manage payments on all your cards (If you have a number of cards).You could miss a couple of payments on any of your credit cards and well …Your credit score is gone for a toss.
Remember: Do not avail credit cards just because banks offer them. Keep a couple of credit cards and make their payments on time. Pay your bills in time Yes you heard me right. Utilities (Payments of your water, electricity and phone bills).Pay these bills on time and your credit score is good and healthy. You should have a no late payment status for a period of 7 years with your water, electricity and phone bill payments to get a good Cibil score. Do not default on the EMI payments on your loans You have availed a home loan and missed a couple of EMI payments. You are 30-60 days late on your EMI payments. Your Cibil score is affected. Worry not….Your Cibil score can be improved.
Quickly pay up the pending EMI dues and soon your Cibil score is back on track. Just remember not to keep your EMI payments overdue for over 90 days. This would take a couple of years for you to improve your Cibil score.
You can off course buy something…You just need to know where to shop. I phone 6 perhaps…Luxury goods and customized mobile phone may be a good idea. You can splurge on gourmet foods. A dinner for two can be in thousands.
You can buy a laptop with specifications you don’t need. Poof…before you know it the bonus is gone.
Wouldn’t it be a better idea for you to retire (pay off) all costly debt before you decide to blow up your bonus. So what is costly debt? Costly debt is all loans or credit cards which charge you a high rate of interest. Credit card charge you an interest rate of as high as 36% per annum if you default on your payments.
Personal loans (Unsecured as there is no collateral as compared to a home loan) have interest as high as 14-17%. Use the Diwali bonus to pay off the credit card dues or pay off a big chunk of your personal loan.