I was having a conversation with my friend and casually asked him about his debt. He said that he does not have any debt, only have a credit card where he pays the minimum amount and happy uses the money. To be honest he doesn't have the basic knowledge about how much Credit Card charges on interest on the money he borrowed.
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The interest on Credit Card is around 36% to 48% which is a huge interest of we compare with the personal loan where the range is around 10.5% to 16%. When I have told him about it, he was shocked as he didn't knew about it. Actually that's the problem with many of us. We do not know the basics, and thus end up wasting our money. I asked my friend to close of the Credit Card debt using the Personal loan. Because the basics of personal finance means that we should get rid of our higher interest debt.
Now moving to personal loan doesn't mean getting rid of, but it actually means that you are lowering the interest rate and might be in some time you will clear it off if you start paying more EMI. This is the case with many of the people who actually do not know the basics. Like a lot of people have taken a ULIP plan whose returns are lesser than 5% I.e. less than that of a FD.
They have taken it because the sales person has given him some big numbers and thus without thinking twice people enrolling in it. Similar is the LIC, I am also became victim of it because of the family member. The returns of LIC is mere 3 to 4%, thar means it is just about wasting money.
And thus after learning the basics of the personal finance, I can say that I don't fall for this and try to educate others too to not fall on these schemes.
