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Get OUT of LOAN and DEBT! | Repay Loans quickly 2022! | Ankur Warikoo Hindi - YouTube
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If you are stuck in the web of loans,
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then through this video,
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I’ll share seven such ways
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with which hopefully
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you could get out of these loans.
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Friends
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getting stuck in loans is
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a very dangerous thing.
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It has happened to me in my childhood
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where, not me
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but my father got stuck in loan.
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And it took many years to get out of it.
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I understand the time where
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credit card collectors stand at your door,
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you get calls every day asking
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when will we return the money.
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This date has come.
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You need to return this amount.
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So, it’s a very hard period to deal with.
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And nowadays
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it is happening a lot.
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Because you get credit cards easily.
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We have got a ‘Buy now pay later’ radium,--
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people are not using these
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in a disciplained manner.
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If you find yourself or your family
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stuck in the web of a loan,
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then this video might help you.
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Seven such ways through which
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you may pay your loans slowly
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with minimal damage.
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And two bonus items
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right at the end of the video.
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Through which you, no matter what,
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can secure your family and yourself.
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The first one, if you find yourself
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in the trap of bad loans,
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there are a lot of loans
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there’s a personal loan,
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there’s a home loan, there’s a car loan,
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a credit loan, then it is very important
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that you prioritize your loans.
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You have to prioritize the loans
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knowing this is important that which loan
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is causing you the most damage.
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Mostly,
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these turn out to be short-term loans.
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These turn out to be the ones
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that don’t have any collateral.
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These turn out to be the ones
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that you buy not with an assest
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but without assets.
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What do I mean by that?
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If you are taking a home loan,
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then mostly to take a home loan
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you need to put your home on mortgage,
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you need to submit the paperwork for home.
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The loan will be for a long duration,
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for 10, 15, 20, 25 years,
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and because of this
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its interest rate would be very less.
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Six percent, seven percent, eight percent,
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but if you take a personal loan,
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to take the personal loan
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you didn’t put any mortgage.
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There’s no collateral.
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Maybe you have taken that loan
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for one, two, or three years.
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You might have taken the loan
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for something that you wanted to buy,
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but you weren’t able to buy,
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so you thought let’s take a personal loan.
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Or, worse your credit card,
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you’ve swiped with the credit card,
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but you weren’t at a stage
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return the money in full.
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So, you started paying in rotation
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the minimum amount due.
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And the next thing you know,
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the amount for your credit
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card has become so big,
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because the interest rate for it is
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thirty-five to forty percent a year.
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So, it is important that all your loans,
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first of all put them in a ranking,
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and try to understand which loan
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is causing you the most damage.
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These are the loans with
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the highest interest amounts,
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and the shortest duration.
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Because their quantum is very big,
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that means, EMI is very big.
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And if you don’t repay that loan on time,
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then your interest will keep increasing.
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That is the first step,
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and I remember when I was in a time,
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where there were credit cards,
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personal loans, home loans, car loans.
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This was the first step that we took,
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father, we first have to figure out
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that which loan we can repay gradually,
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but, which loan do we need to repay today?
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And that is the first step.
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Number two, any long-term loans,
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a home loan, or any such loan,
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which is for five or ten years,
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or if you’ve taken a loan from a person
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whom you know, will trust you,
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he is after his money,
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but, not at the expense of your peace.
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So, sit with them and increase
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the tenure of your loan.
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And this is a counter-intuitive suggestion
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because whenever you increase
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the tenure of your loan,
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or increase the period to repay the loan,
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then you’ll end up paying more interest.
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And that may seem counter-intuitive,
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because, now, you are
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trying to get out of your loan,
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but what will happen is
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during that, when you’ll increase
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the tenure of your loan,
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your EMI will decrease.
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And because EMI will become lesser,
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then hopefully you’ll have some more money
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that you’ll be able to divert towards
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the loans which are sucking your blood,
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that you need to end anyway.
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So, I remember
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my dad took a very big business loan.
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But, thankfully
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the person who gave him the loan,
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was his business partner.
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He wanted to get his money back,
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but also he didn’t want that Ashok Warikoo
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should have to repay the loan
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at the expense of himself or his family.
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So, dad spoke to him very patiently
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and said, I am not at the
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stage to repay this loan now,
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so, can we increase the period of loan,
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so that monthly I’ll pay you
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a little less than I used to,
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but I’ll repay it.
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And they were okay with that.
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Because for him, the important thing was
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at the end of it, he’ll earn more money.
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Because he’ll get more interest.
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And you should also be in principle
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okay with doing that.
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Because of your short-term impact,
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will be very less as the outflow of money
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will become less.
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Number three, when you are able to do it,
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the extra money that you’ll get,
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try to raise your EMI with that,
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or try to make one-time contributions.
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You must understand
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the math of EMI and loans.
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I’ve made a whole excel sheet for you.
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And in that excel sheet,
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I’ll try to show you
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how can you increase your EMI
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or by making one-time contributions
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you can decrease the tenure of your loan
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and the loan amount significantly.
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So, this is the excel sheet.
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You may also download this excel sheet.
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But, I assumed that you’ve
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taken a loan of 50 lakh rupees
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at eight percent for 25 years.
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The EMI for it is around ₹ 40,000.
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At the end of these 25 years,
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you’ll repay 50 lakh rupees anyway,
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but the interest amount
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would be 65 lakh rupees.
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That means in these 25 years,
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you’ll return your 50 lakh rupees,
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but to the bank
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or whoever you’ve taken the money from,
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on top of this 50 lakh rupees,
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they’ll get 65 lakh rupees more.
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And that is a lot of money.
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But, if you are only doing two things,
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every year pay just one extra EMI,
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just one extra EMI, that’s it.
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And increase your EMI by 10%,
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that means the EMI which
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was ₹38,591 in the first month,
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make it ₹42,450 the next year,
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the next year make it ₹46,695.
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And you’ll pay the original EMI ₹38,591
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you’ll pay for it every year.
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When you do that
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then your interest which was ₹65 lakh
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now becomes only 27 lakh rupees.
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And that’s not all.
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The loan is for 25 years,
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not in 25 years
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you’ll clear it within
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Only 120 months,
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within 10 years!
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That is the power of paying
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more than the EMI.
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So, one extra EMI every year,
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and increasing the EMI by 10% every year,
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you’ll make the interest of 65 lakh rupees
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to 27 lakh rupees which means
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you’ll earn almost 40 lakh rupees.
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And the loan of 25 years
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ends within 10 years.
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You can play around with this sheet.
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And this will show you the power of paying
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in excess whether EMI
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or one-time contribution.
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Number four, whatever your loan is,
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especially, if it’s an expensive loan,
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then re-finance it.
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I’ll give a simple example,
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you got the bill for your credit card,
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you are paying 40 to 50 percent, yearly.
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And it is criminal and it is suicidal,
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if you are still doing that thing.
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What you can do is let’s assume,
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your credit card bill is one lakh rupees.
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And it’s in rotating,
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you take a personal loan.
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That personal loan won’t be with a collateral,
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But, it would be at
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a maximum of 13% to 15% or 16%.
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Which is significantly lower
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than the 35% to 40%
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that you pay for the credit card.
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You take the personal loan,
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and pay the credit card payment in full.
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Now,
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you have to only pay the personal loan
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at a much smaller interest rate.
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The same thing,
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if you have a personal loan,
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that you’ve taken from a landlord,
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or a friend, or a contractor at 20%,
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then try to take
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the same thing from a bank
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or someone else at less interest rate.
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You take the money and return it
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to the original lenders in one go.
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And then keep paying the new lenders
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the amount.
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A lot of time it happens with
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the payments of credit card,
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you’ll get a call that you can transfer
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the outstanding bills on your credit card
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to the other one.
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Very risky by the way,
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I do not propose it,
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but, if you don’t have any other choice,
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then this may still be
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a better choice to make.
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Because when you first time
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transfer it, then they give you a rebate
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you get an open offer,
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where the interest in that
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time period is very less,
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and you can actually
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make the most out of it.
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Net net, whatever is the interest amount of your loan,
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wherever you find a lesser than that,
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please take the money from there.
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and clear the original loan
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then try to clear this new loan,
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because that will be
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lower financial distress on you.
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Number five, followed by this,
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as I have told you in order to pay a loan
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if you have to pay another loan,
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then there’s no fault in that.
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I have done that so many times in my life.
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I remember, when there was a time
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nearbuy was going through a difficult time,
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I didn’t take my salary for months,
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there were household expenses,
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kids’ school fee, EMI for home and all.
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My credit card was maxed out.
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Everything was just there.
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And what I then did
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was I took a loan from a friend.
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That person has gave an opportunity
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to pay my credit card bill completely.
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He only charged me 10%
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and that was the cheapest loan
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that I could’ve taken because thankfully,
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I had a friend who had the money.
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So, technically, what I did was
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took a loan from one person,
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and repaid the other loan from that.
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Now, I have this loan completely paid off.
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I need to pay this new loan.
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But, it was through a friend.
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He knows that I will repay his loan
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even if I delay.
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But I won’t run away with his money.
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And most importantly, it was just 10%
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so it was far lesser in cost,
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than what was the original loan.
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Number six, prepare a budget.
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If I tell you that,
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you need to quit cigarette or alcohol,
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and that is something
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that you really enjoy
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or you are addicted to it,
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then it won’t happen just by wanting,
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you need to work towards it, right?
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You will actually have to devote
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your mental, physical, emotional energy
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to make that happen.
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In the same way
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if you are trapped in a loan,
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and you need to get out of it,
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then you will have to work hard towards it.
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And making a budget
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is the first step toward that.
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Try to understand that a lot of people
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get trapped in loans because
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they didn’t plan the budget properly.
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They haven’t thought through everything
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that is going to happen
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and because of this,
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they are sitting now in this
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financial distress situation.
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A great way to prepare a budget
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Is that the EMI for your loans should never be
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more than 30%
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or a maximum of 40% of your total income.
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And the minute it goes beyond that
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you know that
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you are doing something wrong.
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If your yearly income or
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monthly income is 100,
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but more than 30 or 40 is going for EMI,
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then you are doing something wrong.
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And you have to take a pause on that.
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The best way to budget…
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is what’s called the 50-30-20 rule.
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Out of your monthly income
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maximum 50% should go into your needs.
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These are your needs,
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which include your EMI,
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your rent, your food expenses.
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The needs of life, that you have to spend
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to live your life.
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Thirty percent towards your desires.
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And that is where
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you have to control yourself.
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You want to buy a phone, go on a vacation,
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you want to buy a car, buy good clothes,
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whatever it is, you need to adjust
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yourself within this 30%.
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And then remaining 20% towards investments.
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Long-term investments,
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that is for your long-term purchases,
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buy a house, buy a car,
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education for kids, you want to go out,
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plans for retirement,
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whatever the case may be.
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But you are investing that 20%,
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so that you don’t fall in same situation
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that you are in right now.
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You have to take this budget seriously.
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Because until you don’t do that,
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you are going to fall into this loan trap
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again and again.
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And number seven,
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the final and last resort.
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Settlement. Every loan provider,
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carries a certain default in his mind.
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Even if it’s a big bank or a small person,
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for them, an NPA
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means Non-Performing Assets
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there’s a percentage for it,
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which is included in their business.
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It is usually in the range
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of two to four percent.
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That means if they give 100 loans,
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they know that out of those
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two to four loans
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they won’t be able to repay it.
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And they have to settle them.
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If you are at such a point,
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where you can’t think of anything,
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you can’t see anything,
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there’s no way to take a new loan,
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there’s no way to generate extra income
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and repay the loan,
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no way to increase the tenure of the loan,
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whatever the case may be.
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Then, the last resort
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could be a settlement.
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The meaning of settlement is
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whatever your outstanding is,
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you go to them, you’ll confess
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that there’s no way
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you could pay the outstanding.
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And you ask them to
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settle at a smaller amount.
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They are going to,
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ofcourse, be very angry.
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They are going to do everything
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they can, to get their money.
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But, if they come to a conclusion
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that you don’t have the capacity
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to repay the loan,
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then they are going to settle.
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It has happened in my family.
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There was a time when
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my father’s credit card bills
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were so maxed out
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and we had no way to pay them.
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And I remember him
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settling every credit card,
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one by one by one by one.
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The biggest damage that it does is,
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your credit rating will
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end for a lifetime.
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Today, there’s no one who is willing to
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give any loan to my dad.
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Because there’s a stamp on his history,
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that he settled for an amount.
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And that is something that
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you have to bear in mind.
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But the settlement is possible.
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So, if you want to put
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the credit score aside
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and get control of your existing life,
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then settlement is something that
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you should discuss with your bank,
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with your credit card company,
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with your lender that I can’t do it,
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please settle at a smaller amount.
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That is the best that I can do.
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Go for that.
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So, these seven ways,
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to help you get out of a bad loan trap.
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Something that I have
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personally gone through
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and I hope it was useful.
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Two bonus things.
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To ensure yourself, god forbid,
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if this happens to you again,
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then to cause minimum
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damage to your family,
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you have to do two things.
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Number one,
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you have to have an emergency fund.
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You have to contribute
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towards an emergency fund.
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That should be for at least six months
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or ideally twelve months.
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So, whatever your monthly needs,
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whatever your monthly expenses are
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that you have to spend,
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for you to live your life,
[1050]
the expenses for six months
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and ideally twelve months,
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you need to have it.
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This emergency fund
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has to be split into three parts,
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ten percent in cash,
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so whatever your emergency fund is,
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out of it, ten percent will
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always be as cash with you,
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twenty percent in your bank,
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it’s in your bank anytime.
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And seventy percent in your fixed deposit,
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that is growing slowly,
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it’s not beating the inflation
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but the whole purpose of the
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emergency fund is protection
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not growing the money.
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So, these three
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will be the split of your emergency fund.
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Number two is insurance.
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Health insurance,
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for everyone in the family.
[1089]
And life insurance for yourself.
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God forbid if something happens to you,
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then the worst thing you’ll do
[1095]
is leave your family in this.
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You can’t do that.
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You have to ensure that
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your life is insured.
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So, if anything happens to you,
[1103]
that we never want,
[1105]
then your family could get such an amount
[1108]
through which they don’t
[1109]
have the need to earn
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for at least for a few years.
[1112]
And health insurance,
[1113]
in the past two years,
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if we have learned anything
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is that there were a lot of families
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that didn’t have health insurance.
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And because of covid, they ruined
[1121]
as their hospital bill didn’t stop.
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You don’t want to be there.
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So, for yourself, your immediate family,
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for your parents,
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health insurance is very important.
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Because you do not want to be
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spending money on hospitalization,
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when somebody else can do it for you.
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These seven ways to get out of a bad loan,
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these two things of an emergency fund
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and insurance to ensure that
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if you get stuck at that point
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then you and your family
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suffer minimal damage,
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is my way of trying to help you
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out of a bad loan.
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I hope this was useful.
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Ankur Warikoo, signing off.
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