Credit has become an unavoidable necessity in today's world. We seek the help of loans and credit cards for many purposes, including housing, cars, higher education, and more. But if the use of credit is not controlled, it can become a huge financial burden. In 2025, let's see how to use credit wisely for financial security.

Know Your Debt

The first step is to make a list of all your debts. Write down the details of each loan and credit card (total amount, interest rate, EMI, remaining term) on a sheet or Excel file. This will help you understand how much your total financial liability is.

Tackle High-Interest Debt First

Not all debt is the same. Credit card debt usually has a high interest rate (up to 36%!). So, use your money to pay off the debt that carries the highest interest rate first. This is known as the 'snowball' method. As you continue to pay off the EMIs of other loans, pay more money back to the credit card balance.

Budget for EMIs

It is not only the money left over after the monthly income comes that should be set aside for EMI payments. Make a habit of setting aside money for EMIs while preparing the budget. Make sure that no more than 40-50% of your total monthly income goes towards EMIs. If it is more than this, it will affect your daily expenses.

Use Credit Cards Wisely

A credit card is a tool to be used for emergencies, not income. Therefore,

Always make full amount payments: Avoid paying only the minimum amount and using the remaining amount for daily expenses.

Avoid unnecessary expenses: Avoid buying unnecessary things by looking at "offers".

Use less than 30% of your credit limit: This will improve your credit score.

Consider Debt Consolidation

If you have multiple credit card bills or small loans, consider consolidating them into a single personal loan. This will reduce the high interest rate and make it easier to manage your debt into a single EMI. However, you should ensure that the interest rate on the new loan is lower than the average interest rate on all your old debts.

Check Your Credit Score before a New Loan

Before applying for a new loan or credit card, check your credit score (CIBIL score). A score above 750 gives you a chance to get a loan at a low interest rate, which can help you save a lot of money in the long run.

Build an Emergency Fund

In case of unexpected medical expenses or job loss, having an emergency fund will help you avoid having to rely on a credit card or a high-interest loan. Try to keep an amount of money equal to 3-6 months of expenses in cash.

Prepayment is Key if Possible

When you receive extra income (bonus, income tax refund, etc.), consider prepaying your loans. This will reduce interest costs and shorten the term of the loan. However, check in advance if there are penalties for prepaying.

Debt is just a tool, and you control it. Take a holistic and conscious approach to managing debt. Follow small steps, set financial goals, and seek help from a financial planner if necessary. With smart decisions, you can reduce the burden of debt and build a secure and prosperous future.