Tips to get out of a debt trap

November 3, 2008

Recently, when a woman in her mid-30s approached Bank of India’s debt counselling centre – Abhay – with her two friends, counsellor V N Kulkarni was quite shocked with her state. She kept wiping her tears with a tissue paper and was visibly upset. Her friends explained to Kulkarni, “She has a debt of Rs 40 lakh and we want to know our options.” The details were scary.

Faced with a debt trap, here are a few things that you should consciously do.

Inform your spouse/parents: The biggest mistake a person makes is keeping their family in the dark. And then out of nowhere, when recovery agents start calling or visiting the house, they are shocked.

Credit counselling centres say that this happens in 7 out of 10 cases. Even in the case of Kasturi, she kept her credit woes a secret, fearing dire consequences, if her family members came to know about her escapades with money.

According to financial planner Suresh Sadagopan, informing a spouse is a big help. For instance, when a wife is aware of the loan, she can actually cut down on the expenses to help increase the monthly outgo.

Plan for repayment: List down the routine monthly expenses and narrow down on an amount you can spare towards repayment of the debt. And follow that regime diligently till the entire amount has been wiped off.

Swap high-cost loans with low-cost ones: In the majority of cases, the reason for debt trap is the high interest rate payout that customers do not anticipate. Banks charge as much as 45-50 per cent on credit cards and upwards of 20 per cent on personal loans.

To get rid of the high interest loans, look to borrow cheap. This can include National Savings Certificate (NSC), loan against life insurance, Kisan Vikas Patra (KVP), shares, mutual funds, gold and fixed deposits (FDs). One can borrow against these securities and get a much cheaper loan. Experts suggest that NSC and KVP should be the first option to borrow against as they are illiquid. By the time they mature, a person can square off the loans. Even loans against securities can be taken at the rate of 14-16 per cent a year.

One-time settlement: If the bank allows the defaulter to settle all the dues in one shot, the person should work out a one-time-settlement (OTS) with the lenders. The process that can be followed is this. Approach the bank, list down all the loans and dues you own to various financial institutions, without mentioning their names. Express your desire for an OTS. This will give the impression to the bank that you are willing to pay back.

To avoid any loans from becoming non-performing assets (NPAs), banks are willing for a settlement if the borrower is willing to pay off the principal amount. On a case-to-case basis, the settlement can be made in instalments as well.

Restructure the loans: If OTS is not possible and your earnings cannot match up to the monthly outflow of dues, ask the bank to restructure the loan. Draft a letter that states your current financial condition. Mention the money you need to pay off. Give a clear picture of your net salary and request the bank to restructure.

The banks will restructure the loan, wherein higher equated monthly instalments (EMI) are charged as and when the financial position of the borrower improves.

In case, the default has occurred due to a job loss or uncertain medical expenses, banks can also waive off the penalty charges and accumulated interest on the default amount. Madan Mohan, a counsellor at Disha Financial Counselling, says, “When one negotiates with credit card companies to settle the dues, the issuers do waive off over-limit and other finance charges.”

Also, convert credit card dues into a loan. The customer can pay the outstanding as equated monthly instalments (EMIs). The interest can come down to less than half (between 22-24 per cent).

Declare insolvency: In a worst-case scenario, if the person has lost all his money due to an unfortunate event and neither has any assets nor any source of income, the only way out is filing a petition for insolvency. The borrower goes to the bank and declares himself bankrupt. The court takes over all the assets, including the house, and liquidates them to repay the lenders.

But this is a complicated procedure, wherein the court conducts a thorough due diligence of the person’s financial position. The entire procedure can take up to three years.

Source: Rediff


11 ways to be a happy employee

November 3, 2008

Can you recollect a day where you woke up at 5:00 am, got ready quickly and waited to do something exciting? Was it your college annual day function? Or a competitive exam? Or maybe a first date? Maybe it was your wedding day. Is it Monday morning to work? If the answer is the last, surely you are a happy employee.

Though the above occasions may not have a lot in common, excitement and motivation can be attributed to almost all of them. However, at the workplace, it is almost impossible to find both or any one of these attributes daily. But, being happy or unhappy is always in our hands. That’s the choice we make and we are the creators of the outcome by our actions. Let’s look at what might make an employee unhappy.

  • Unfair rewards and recognition
  • Office politics
  • Un-cooperative team
  • Unreasonable boss
  • Insufficient compensation
  • Constant threat to job security
  • Lack of responsibility in the current job
  • No clear career path
  • Seating location
  • Lack of basic facilities at workplace

1. Plan your week on Sunday night
Look at your work calendar and plan your week on Sunday night or Monday morning. This would include important meetings, deliverables, a brief summary of things that are pending from last week and any tasks to be achieved during the week. Though this might look like a time management tip, at the end of the week, on Friday night when you re-visit what you have achieved over the last five days, the satisfaction is immense.

2. Undertake activities that you are passionate about even though it might not be in your job profile
Start an initiative that you would love to do irrespective of whether it is required for you to do or not.

  • Send a daily newsletter to your team on the topics that most of them will be interested.
  • Do a presentation on the topic that you are passionate about.
  • Organise a small sports event for your team.
  • Call everyone in your team for a team coffee, breakfast or lunch break
  • Appreciate colleagues in your team or in a cross-functional team who did a great job
  • Write a poem on your team’s achievements
  • Arrange a potluck lunch

3. Do not indulge in the blame game
If something goes wrong do not blame others blindly. If you commit a mistake, do not hesitate to accept it. As Gauthama Buddha said, there are three things we can’t hide for long: the sun, earth and the truth. Accepting your mistake gracefully will only make you look like a true professional and also give you the satisfaction of not cheating.

4. Communicate more often in person
Utilise all the opportunities where you can speak to an individual in person rather than e-mail or phone. But be aware of the other person’s time and availability. Listening to a positive answer from a person will give you more happiness than if it is done over the phone or via e-mail.

5. Know what is happening at your workplace
Will this make a person happy? Truly, yes! Imagine a cricket team that doesn’t know how many runs to score to win a match? More than losing the game, the player will never be interested or motivated to play well.

Attend all meetings that are addressed by the CEO to your immediate manager to know what is going to happen around you. It could be the company’s growth plan or your department’s next big project. Jack Welch mentions in his book Winning “every employee, not just the senior people, should know how a company is doing.”

You will also get an extra edge if you are in a position to answer queries raised by your peers or juniors. This is not just for the good reasons, but bad reasons as well. You do not want to be the last employee to know if your company is laying off employees (in the worst case, if you are the one who is on that list).

6. Participate in organisation-level activities
This could be as simple as spending one weekend for a corporate social responsibility activity or attending a recruitment drive to help your HR team or arranging a technical/sports event at the organisational level. Most of these events will be successful as people do come on their own to contribute.

7. Have a hobby that keeps you busy and happy
Many people say their hobby is watching TV or listening to music or reading the newspaper. These aren’t hobbies, they are just ways of passing the time. Some hobbies are evergreen and will keep you evergreen as well: dancing, painting, writing short stories, poems, blogs and sharing your experiences.

8. Take up a sport
While choosing a sport make sure that there is physical activity. There is the danger of becoming addicted to sports where there is less physical activity (like computer games, chess, cards etc). Physical activity keeps a person healthy and happy. If you pick up one sport well, you can represent your organisation in corporate sports event too.

9. Keep yourself away from office politics
Politics, as a practice, whatever its profession, has always been the systematic organization of hatreds. — Henry Brooks Adams

Politics is everywhere and the office is no exception. Playing politics might be beneficial but only for the short term. So the best thing to do is play fair.

10. Wish and smile
More often than not, there are fair chances that the other person will smile back. This could be your security guard at the gate, your receptionist, your office boy, your CEO or your manager — never forget to wish them and smile.

11. Volunteer for some activity

The value of a man resides in what he gives and not in what he is capable of receiving. Albert Einstein

Do at least one activity without expecting anything in return. There is no set frequency for this. This could be once in a day or once in a week or thrice in a week. It could be as simple as making tea at the office for your colleague, helping a colleague who is working in another department by using your skills, dropping your colleague at his door step in your car, going to your manager or colleague to ask if there is any help you can extend, contributing to technical or knowledge management communities in your organisation etc.

Source: Rediff