covidtimes . Debt ... or not to Debt?

Times are tough and will get tougher as we progress.  Some of us may have to take on debt to wade us through these tough times.

What rules should be applied while taking on debt IF and only IF one has to ( read my previous post on creating an exit strategy of your investments).

 Credit card debt is a NO-NO.

This is the highest debt interest. 30-40% pa interest rates. Which means your amount to be paid back doubles in 2 to 2.5 years. Do not fall into this trap .

If required move away completely from using credit cards to debit cards. 

Hopefully you havent taken the moratorium on credit card payments because all that the banks are doing is to postpone  the payment but are still charging the exorbitant interest rates  

Home loan extensions or additions

This is usually the lowest possible interest rates available. Good to use and and is also long term in nature.

Personal loans

Above the home loan interest rates and definately possible to use. However do not use these loans for stuff like travel ( not the time to travel). Use it if you need to buy some sort of an asset like a car or something.

Zero cost EMI

Lots of companies do provide zero cost emi to help reduce the burden on cash flow for people. Ask the manufacturer or service provider to give an option.  If they do have an option ask if you pay upfront can you get a larger discount. 

I got a nice discount for an online course yesterday by paying upfront.

In short the rules dont differ too much from regular times, but the important point in these times of covid is to conserve capital and be frugal until things improve.

Be smart.. simplefinancialsense. 

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