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debt managementDebt management strategies

The following simple debt management strategies will assist you in reducing your debt exposure  and let you have fewer sleepless nights worrying about your debts. 

Debt management strategy 1:Get rid of credit card debt

The first debt management strategy : It is plain and outright stupidity to max out your credit cards and get into serious credit card debt. 

This debt management strategy is often the most effective since credit card debt is often at the highest rates of interest and you could be paying 20-25% interest to the credit card company. In comparison, a personal  line of credit or a personal loan from a bank will have a much lower rate of interest. You should visit your bank and check if you are eligible for a line of credit.

The other option in this debt management strategy is to get a new credit card at a lower overall rate of interest - however shift to a line of credit at a bank when you are eligible and gradually get rid of both the credit card debt and the line of credit debt.

Debt management strategy 2:Mortgage refinance your home loan mortgage debt 

This could your most important debt management strategy- since your mortgage home loan is probably your biggest debt and your biggest asset as well. If you have a home loan mortgage debt that you have been paying for at least 3-4 years, the first thing you need to do is to check the possibility of mortgage refinance for better debt management

Your personal credit rating may be different from the time you got the mortgage home loan and interest rates could have changed drastically to make you consider mortgage refinance debt- essentially you get a new home loan at a lower interest that pays off the older home loan. A caveat for this particular debt management strategy - there could be administration and other finance charges involved in foreclosing the older loan and starting a new mortgage home loan, so working out the detailed math for this debt management strategy is essential

Debt management strategy 3:Invest wisely!

This debt management strategy basically says that 'Thou shalt always invest, diversify my investments and invest as per my risk profile'

This debt management strategy has the following three golden rules

Always stay invested- Dont let your hard (or hardly!) earned money rot in a checking account of the  bank - keep investing the money wisely- investing to make a profit is better than worrying about debt management

Diversify your investments- Along with debt management,invest in multiple channels - be it a money market profile , a mutual fund or an individual stock- dont put all your retirement gmoney eggs in the same basket

Invest as per your risk profile- Just as we at do not tell you which debt is better, we  do not intend to tell you to invest only in stocks, or only in real estate. You should invest in riskier ventures  such as stocks if you feel you can withstand the possible loss, but you should only invest in non-risky ventures if you prefer steady safe investments to riskier investments

Debt management strategy 4:Keep at least 3 months expenses worth of liquid cash

This debt management strategy is really important for you and your family- Keep enough money to cover any medical or any other family emergency. We at are risk averse in debt management and advice you to keep at least 3 months expenses  worth of liquid cash.



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Last modified: August 31, 2005