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A Smart Shortcut Forincurring Lower Debt – A Recurring Deposit

By Author: Neha Sharma
Total Articles: 1043

Having a financial plan is a great path to achieving success. Part of this includes setting tangible goals like earning a certain amount, investing in future projects, which can in turn include personal projects, as well as future plans, children’s plans and even retirement. These worthy goals can be achieved with additional help, like a loan a loan for example. However, very few individuals consider lowering of their debts as a tangible and achievable goal.

But why would you not want to go consider this as a goal? A debt is rarely considered as an issue, unless you are too deep into the same, with no other alternate option for repayment. But lowering your debt may help you improve your credit score, qualify for other extensive loans like a home loan and get some peace of mind as well. You can achieve these goals easily through investment options like a recurring deposit. This deposit option will help free up more of your cash and help you move onto other financial goals. How does one go about it, you ask? We will tell you how:

Create A Down Payment:

When you take a car loan, for example, you will have to pay a monthly installment which is includes a part principal amount and a part interest. This amount is spread over a fixed tenure which can last anywhere between 5 years to 7 years depending on the cost of the car. The ideal way to deal with such a situation is to open a recurring deposit before you can apply for the loan.
Put in a small yet sufficient amount every month, by which at the end, you will receive a larger amount on return of interest. Synchronize the maturity period and the application for car loan in such a way that the funds of the deposit can be used as a down payment. This is most preferable way to get the needful amount, as it allows you pay lower car loan EMI and save up the interest on the same.

Save Up More:

Normally, when you are repaying of any loan, at the end of the tenure, you are left with very little funds left. If, in such a situation, an emergency situation arises, what would you do? If there is a health scare in a family or urgent requirement for funds, you may not have sufficient funds to pay at that time. The best way to deal with such a situation is to start a recurring deposit. You can pay off an EMI and yet, invest small amount in this deposit for a short period of time. this tenure can be anywhere between 6 months to 1.5 months for a short term goal or even 3 to 10 years for a long term goal. Thus while you are still paying off your loan, you are earning an additional income.

If you synchronize the tenure period to match with the maturity of the deposit, you should have sufficient funds even after you have paid of your loans. This should be adequate if a financial emergency arises. You can also use these funds to prepay a loan and complete your loan repayment in a shorter tenure.

So, use a recurring deposit as an asset during crunch times, a down payment or an asset to prepay the loan. It is a great financial support tool indeed. Make most of it.

Author Bio :- Neha Sharma is an avid finance student who loves to write during her free time. She is well-versed with the different advantages of a recurring deposit and wishes to share all this information to those who would like to reduce their loan debt with this form of term deposit.

Total Views: 160Word Count: 620See All articles From Author

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