Following are the Opportunities in Bank Of India SWOT Analysis:

1.Venturing into rural areas

 Of India Opportunities
2.Installtion of more ATMs
3.Use of mobile banking, internet banking on a large scale

The threats in the SWOT Analysis of Bank Of India are as mentioned:

1.New banking licenses
Bank Of India Threats
2.Foreign players
3. Disinvestments

Bank Of India Competition

Below are the top 5 Bank Of India competitors:

1.Bank of Maharashtra
2.Bank of Baroda
Competitors
3. Central Bank of India
4. State Bank Of India (SBI)
5. ICICI Bank

Bank Of India SWOT Analysis

Below are the Strengths in the SWOT Analysis of Bank Of India:

1. A public sector undertaking. Thus, has government backing
2. Increasing profits over the years
Bank Of India Strengths
3. Pan India presence with over 3400 branches
4. Founder of SWIFT (Society for Worldwide Inter Bank Financial Telecommunications)
5. Large employee base

Here are the weaknesses in the Bank Of India SWOT Analysis:

Bank Of India Weaknesses 1.Brand valued not as big as SBI or BoB
2.The branches are not modernized in many cities as compared to leading banks

Awards
2010–2011
 The bank received the Winners Award in International Banking Technology Award 2010 from IBA in the Best Business Enablement Initiative category in recogni
achievement in Banking Technology for the Year 2009.
 The bank adjudged FE–EY Most Efficient Public Sector Bank 2010 by Dalal Street.
 Mumbai North Zone of the bank received Third Prize for use of Official Language Hindi in Bank from Government of India, Ministry of Home Affairs, Official Lan
 The bank received the consolation prize from Maharashtra State Level Bankers Committee for commendable work done in implementation of official language
 The bank received National Award for Best Bank in West Zone for PMEGP under lending to KVIC in August 2010.
 The bank has been rated by The Economic Times/The Nielsen company survey ?óÔé¼?£The Most Trusted Brands?óÔé¼Ôäó (MTB) 2010 as follows:– Under P
Category – 2nd next to SBI– Under Top Service Brands – 8th rank
2009–2010
 Best Performance in Western Zone under the Rural Employment Generation Program (REGP) of KVIC.
 The bank rated by the Economic Times / The Nielsen Company survey as ?óÔé¼?£The Most Trusted Brands?óÔé¼Ôäó (MTB) 2009 as follows :– Under PSU B
2nd next to SBI.– Under Top Service Brands – 8th
 The Debutant – 1st time in top 100
 NDTV Profit Business Leadership Awards 2009 – Best PSU Bank
 Outlook money NDTV Profit Awards 2009 – Best Education Loan Provider – Runner up
 CIO Green Information Technology Award
 Dun & Bradstreet – Rolta Corporate Awards 2009, Best Bank under Banking Category
 FE–EY Most Efficient Public Sector Bank Awards 2010 by Dalal Street
 Second Rank for excellent performance in lending to Micro & Small Enterprises Sector by the Ministry of Micro, Small & Medium Enterprises. Also, ?óÔé¼?£Bes
óÔé¼Ôäó for covering maximum number of Micro & Small accounts under collateral free lending scheme of CGTMSE
2008–09
 The NDTV Business Leadership Awards 2008 – India?óÔé¼Ôäós Best PSU Bank Award.
 Business World – PWC Survey – No. 1 Public Sector Bank
 Business Today – KPMG Survey – Ranked No. 1 – The Best Banks 2008.
 Dun & Bradstreet Study 2008 – Best Public Sector Bank and Overall Best Bank in the country.
 Dun & Bradstreet – Rolta Corporate Awards 2008 – Top Indian Company under ?óÔé¼?£Banks?óÔé¼Ôäó
 Prestigious CIO 100 Award 2008 for the Bank?óÔé¼Ôäós Green IT initiative
2007–08
 Second National Award for excellence in lending to MSE sector for the year 2006–07.
 Golden Jubilee Award 2007, for performance under KVIC during 2006–2007 under Western Region, issued by Ministry of Micro, Small & Medium Enterprise, Go
 Best Performance Award under ?óÔé¼?£Mission Shakti?óÔé¼Ôäó for financing Women SHGs during 2007–08 in the State of Orissa by the Government of Oris
 The bank was awarded International Award for Excellence in outsourcing sponsored by Everest Group & Forbes at New York, USA

What’s Considered Good Debt?

Good debt allows you to manage your finances more effectively, to leverage your wealth, to buy things you need and to
handle unforeseen emergencies.

Examples of good debt are taking out a mortgage, buying things that save you time and money, buying essential items, investing in
yourself by borrowing for more education or to consolidate debt. Each may put you in a hole initially, but you’ll be better off in the
long run for having borrowed the money.

Taking out a Mortgage

There is probably no better debt than a mortgage. For one thing, you have to live somewhere. For another, you might as well live
somewhere that gains value every year.

Housing prices increased an average of 6.4% a year from 1968 to 2004. The money train pretty much derailed when the mortgage
bubble burst a few years later and brought on the Great Recession.

The market has recovered, with the median home value in the U.S. hit $196,500 in March of 2017, according to Zillow.com. That
was a 6.8% increase in a year and continued an upward trend that began in 2012.

What does that mean in real money?

If you buy a home for $235,000 and it appreciates 3% a year, it will be worth $485,000 when your 30-year mortgage is paid off.  If it
appreciates 4% a year, that initial $235,000 investment will be worth $649,000.

Now that’s good debt to have.

Getting a Home Equity Loan or Line of Credit

These are basically offshoots of a mortgage.  You get a loan using at a relatively low interest rate using your house as collateral.

A lot of consumers use that to pay off higher-interest debts like credit cards. Some use it to make home improvements like solar
panels that could save money on utility bills and increase the value of your home.

The only stress comes from the prospect of having your house foreclosed if you can’t make the payments.

Getting a Student Loan

If you want a good education and need some help paying for it, you have plenty of company. The student loan industry is
expanding faster than Elvis in a doughnut shop. Americans carry more than $1.4 trillion in student loan debt, which is about $620
billion more than the country’s total credit card debt.

It’s worth it if – and it’s a big if – you are buying an education that will lead to a well-paying career. Full-time worker over 25 with
only a high-school diploma had a median weekly income of $679 in 2016, according to the Bureau of Labor Statistics.

The median weekly income for workers with bachelor’s degrees was $1,435. But you have to have the right degree. So with
apologies to Waylon Jennings, mamas let your babies grow up to be petroleum engineers. They make an average of $96,000 a
year coming out of college, according to a 2017 PayScale report.

Anything in the so-called STEM fields (science, technology, engineering and mathematics) has high earning potential.

On the flip side, you might never pay off your student loan if you major in liberal arts. A Psychology grad makes about $29,000 a
year when they enter the real world.
If your dream is to major in Photographic Arts or Philosophy or Women’s, Gender and Sexuality Studies, your friends may tell you
to pursue it. Your financial advisor will not.

Small Business Loan

If you want to get really, really rich, your chances are much better if you start your own company and work for yourself. Small
business loans are tougher to get because they are riskier to the lender.

Almost one-third of small businesses fail to survive their first two years, according to the Small Business Administration. But if you
have enough ambition, savvy and luck, borrowing money to start your own business could be the best investment you’ll ever make.

 What is Bad Debt?

Anything that decreases in value the minute after you buy it, is bad debt. Unfortunately, that describes many of life’s basic
necessities, like clothes, automobiles and that 60-inch flat screen TV you need to watch NFL games.

If you can’t pay cash for them, you should at least consider settling for off-brand clothes and 43-inch TV. Here are examples of bad
debt.

Credit Cards

Plastic can ruin your financial health, and interest rates are the silent killer. Figuring them out is confusing, and that’s fine with credit
card companies. If consumers knew how much they are actually paying for the privilege of using a card, they’d storm the mansions
of every card company president.

Remember that 60-inch flat screen TV? Say you got lucky and found one at a scratch-and-dent sale for $1,200, and you put on
your Visa with the 18.9% interest rate.

If you paid $60 a month (which would be more than the minimum required), it would take 63 months to pay off and cost a total of
$1,676.98. That’s a hefty premium to watch Tom Brady in high definition.

The average household with credit card debt has a balance of $16,784, according to a 2016 NerdWallet survey. That indicates a lot
of people are way over the recommended 30% credit utilization ratio.

That also means if you’re using more than 30% of available credit, your credit score is going to suffer. That means higher interest
rates when you apply for a loan or new credit.

Payday Loans

As bad as credit cards are, payday loans are 10 to 15 times worse. You get short-term cash to get you through a crisis. In return,
you post-date a check, hoping you can pay off the balance when your next paycheck arrives, which is typically two weeks.

It’s quick and easy, but the finance charges range from $15 to $30 for every $100 borrowed. A typical two-week payday loan with
$15-per-$100 fee equates to an annual percentage rate of 400%. If that doesn’t induce nausea, you need to see a
gastroenterologist.

Automobile Loans

They are generally considered bad debt because, unless it’s a 1966 Mustang or some other collectible, cars are worth less a half-
mile off the lot. On the other hand, automobile interest rates are relatively low and if you need a car to get to work, well, a guy or gal
has to earn a living.

The most financially prudent move is to avoid splurging on a Mercedes when a Hyundai will do. If you want to eventually be able to
afford that SL 550 Roadster, you’ll need what debt you have to be good so pay this loan off on time.

Are you in debt? We can help!

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AUTHOR

Bill Fay

STAFF WRITER

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping
birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and
professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York
Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned
some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at [email protected].

1.2 BACKGROUND OF THE STUDY. 

The banking system has been single out among industry, which has heavier regulations than any other
economic activities that governs its operation in the system, or its anticipation constituted by laws.

But the current banking sector has some constants widely acknowledge arising from non-performance of
loan which create a number of factors such as poor management loan policy on income growth and
unsound judgment, fraud, forgeries through federal government that set-up the Nigeria deposits
insurance corporation (NDIC) to protect the interest which most have resulted to problem toward their
operation, and its was established by decree No 22 of 1988. So the banking industry has been single to
play a specific role in protection the economy growth of due process and development.

Also there was a body or union set-up by federal government by decree No 18 of 1994 establishment to
failed bank (Recovery of debt and financial malpractice tribunal, that were authorized to recover debt
owned to failed bank.

1.3 OBJECTIVES OF THE STUDY 

(1) To identify debt recovery techniques in banking sector

(2) To indicate debts recovery techniques employed by banks

(3) To find out the problem of debts recovery in the banking sector

(4) To identify the prospect of debts recovery in the banking sector

Get Full Work

Statement of the problem Most of the financial institutions utilize debt in different ways to influence the investment made in their assets which
influences the return on equity. This influence, the debt equity amount and is considered significant in influencing the investment riskiness; the higher debt
per equity, the more risky it is. For both financial institutions, individuals and companies, this increased risk can lead to poor performance/results, as the
cost of servicing the debt can develop beyond the capacity to repay due to internal difficulties either due to poor resource management or income loss [3].
Ideally, debt recovery techniques have been used as a legitimate and necessary organizational activity where collectors and creditors are able to take
reasonable steps and procedures to secure payment from businesses or customers or that are bound legally to repay cash they pay or owe. According to
CBK annual reports released shocking evidence that non-performing loans for 2015 was high. According to the annual reports on bank supervision 2015, out
of loan book of KES 2.02 trillion in 2014, 5.3 billion was non-performing loans (debts). In addition, Kenya Bankers Association and parliamentary select
committee on finance disagreed on the likelihood rise in default rates due to rising interest rates. This does not only call for banks to be prepared in tackling
debt recovery but calls for different techniques of debt recovery to be put in place so that as the financial institutions are not caught unawares. To further
support the fact that debt recovery is a problem in financial institutions in Kenya is the high rate of defaulted loans in the country. Moreover [10] indicate
that the rate of debts to gloss loan from 2011 to 2015 were 2011 (10.6 Billion), 2012 (9.0 Billion), 2013 (7.9 Billion), 2014 (6.3 Billion) and 2015 (5.4 Billion).
There are various studies done on debt recovery including [11]on factors that influence long term debt recovery by companies listed at the NSE, [8] carried
out a study on expected common stock return and debt ratio from the NSE.[12] conducted a study on the relationship between growth opportunities and
debt structure of firms listed by Nairobi stock exchange,[13] did a study on the analysis of assets structure and debt policy for companies listed at the
Nairobi stock exchange, [14] did a study on the determinants of corporate debt maturity structure for companies listed by Nairobi stock exchange,[15] did a
study on Comparison of interest rates between short and long term. This has necessitated the need for this study to fill the gap on the effect of debt
recovery techniques on performance of financial institutions in Eldoret town. 1.3 Objectives of the study The study purpose was to examine the effect of
debt recovery techniques on performance of financial institutions in Eldoret town. The study was guided by the following specific objectives; i. To examine
the effect of account transactions on performance of financial institutions in Eldoret town. ii. To establish the effect of guarantors on performance of
financial institutions in Eldoret town. iii. To determine the effect of auction on performance of financial institutions in Eldoret town. iv. To assess the effect
of collateral retention on performance of financial institutions in Eldoret town. 1.4 Research Hypotheses The study was guided by the following research
hypotheses: HO1: There is no significant relationship between account transactions and performance of financial institutions in Eldoret town. HO2: There is
no significant relationship between guarantors and performance of financial institutions in Eldoret town HO3: There is no significant relationship between
auction and performance of financial institutions in Eldoret town. HO4: There is no significant relationship between collateral retention on performance of
financial institutions in Eldoret town. II. LITERATURE REVIEW 2.1 Theoretical review The techniques used in debt recovery are about the relationship that is
present between the institution that lends and the borrower of funds. Therefore it is a mutual benefit that accrues to both the lender and Effect Of Debt
Recovery Techniques On Performance Of Selected Financial Institutions In Eldoret… www.ijhssi.org 84 | Page borrower when the debt is fully collected. The
lender gains profits from the scope between lending rate and interest on deposits rate. On the other hand, the borrower is assured of a favourable account
transactions score from the lender upon full repayment of debts. The study discussed three types of theories that explain the relationship between debt
recovery techniques and performance of financial institutions here are three main theories that explain the types of relationships that exist between the
lender and the borrower, they include the following; 2.1.1 Customer-Supplier Relationship Theory The Customer-Supplier Relationship theory was proposed
by [16] and cited in [17]. The customersupplier relationship theory holds that there are costs and benefits that accrue to both the lender and the borrower
in their relationship created by the debt recovery techniques. The four types of costs in the debtorcreditor relationship range from presale, production,
distribution and post-sale service costs. According to [18] the main benefits include customer economics, power, the nature of the decisionmaking unit and
the institutional link between the creditor and the debtor. Therefore, depending on the quantity of interest charged on the loan there is always a wide
range of profit margins that would accrue to the creditor if the debt is fully repaid and also accrue to the debtor if they fail to pay on the debt repayment.
The proponents of this theory use a portfolio approach to analyze customer-supplier relationships and use it to recommend a classification matrix. This
theory thus implies that debt recovery techniques is a significant aspect of the performance of financial institution whereby debt repayment is a matter of
association between the creditor and debtor and the continuation of mutual interests in terms of gains for both parties. 2.1.2 The Expected Utility Theory
The expected utility theory was proposed by [19]. The expected utility the

This industry is also making considerable development in the direction of developing apparatus that determine debt recovery techniques in a portfolio
background. Organizations are also using debt recovery derivatives to shift risk efficiently while safeguarding customer relationships. Figure 1: Conceptual
framework 2.2 conceptual Framework The conceptual framework in figure1 shows the relationship between the independent variables which is debt
recovery techniques (account transactions, auction, collateral and guarantors), the dependent variable which is performance of financial institutions
conceptualized by profitability, organizational image, customer

1.  Review of literature (5-10 Pages) 2.1 Rajendra Singh The Journal of Indian Institute of Banking & Finance, Vol. 76, January, 2005. In his
article titled “Empowering Banks for Recovery of Non- Performing Assets (NPAs)" the author had concluded that with the enactment of this
Act, it is felt that borrowers will no longer be able to take Banks lightly and simply walk away with scarce public money. The threat of taking
over of collateral assets and enforcement of loan covenants has already begun to show positive results. So far NPA recoveries are estimated
to be in the range of 20 percent. During the next 3-4 years, the Banks hope to recover 50 to 60 percent NPAs through tough measures. This
Act is an essential pre- requisite for smooth operations. This Act will not only help in improving the financial health of the country but also our
moral fiber as a society by enforcing the sanctity of contracts. Indian Banks have suffered immensely from the slow movinglegalmachineryfor
loan recovery and strong lenders. However, it is too presumptuous to treat the enforcement of security and recovery of NPAs as a
synonymous. Banks might find that the minefield of complex. Indian procedures may create unforeseen stumbling blocks in putting theory into
practice. In the ultimate analysis; the recovery process will need to be based on business analysis and restructuring rather than on the
legalistic approach of asset attachment. A legal system can help in setting the condition for discussion but cannot ensure asset utilization. A
new breed of restructuring experts will have to emerge to taken this process forward. It is knowledge more than law and capital that will help
the process of change. From the above literature review us the identify the variable as: legal machinery for loan recovery Q.1.Do you think the
legal machinery for loan recovery process is stringent enough?
2. 22. 10 2.2 GouravVallabhi, AnoopBhatio and Saurabh Mishra (2007) explain that the Non- performing assets are considered an important
instrument to judge the efficiency and financial health of banks. The level of Nonperforming assets is one of the factors effecting a financial
stability and growth of the banking industry. The authors made an effort to find the fundamental factors which impact Non-performing assets of
banks. It is that banks’ exposure to priority sector lending reduces NPAs. From the above literature review we identify the variable as: financial
health of banks Q.2. Do you think Non-performing asset is an appropriate tool for defining the financial health of banks? 2.3 Thanker H M and
Double U S (2010) viewed that the banks can avoid sanctioning loans to the non- creditworthy borrowers by adopting certain measures.
Banker can constantly monitor the borrower in order to ensure that the amount sanctioned is utilized properly for the purpose to which it has
been sanctioned. The banker should get both the formal and informal reports about the goodwill of the customer. If he had already proven as
defaulter then there is no question of sanctioning loan to him. The banker also has to educate the borrowers regarding the effects and
consequences of defaulting. From the above literature review us the identify the variable as: defaulter Q.3.Do you think it is difficult for proven
defaulter to get loan sanctioned? 2.4 G. Chandrashakar Rae (2003)8 studied the present and most critical issue faced By the banking system
has been hug pile-up of non-performing assets which the banks have come to be saddled with. As result of the survival of many weak bank
managements and unions of their employees, he noticed that the main reasons for the banking units to become weak leading to mounting
NPAs in diversification of funds by promoters, the other region is
3. 23. 11 the tardy legal system and the inadequate legislation for recoveries. The reasons stated for the increasing NPAs in the primary sector
are directed and preapproved loans sanctioned under sponsored programmers’, absence of any securities, lack of effective follow up etc. It is
found that majority of the defaulters are willful defaulters and hence criminal proceedings against corporate defaulters are to be issued to
recover this national wealth. Government shall ensure proper legal foundation for enforcement of contracts and effective recovery of dues by
banks. From the above literature review us the identify the variable as: effective recovery Q.4.Do you think the SARFAESI Act is really
effective for recovery management? 2.5 Amitabh Joshi (2003)11 conducted a survey on “Analysis of Non-Performing Assets of IFCI Ltd”.The
study found that Profitability and Viability of Development Financial Institutions are directly affected by quality and performance of advances.
The basic element of Sound NPA Management System is quick identification of Nonperforming advances, their containment at minimum
levels and ensuring that their impingement on the financials is at low level. Excessive reliance on Collaterals has led Institutions to long drawn
litigations and hence it should not be sole criteria for sanction. Banks should manage their exposure limit to few borrower(s) and linkage
should be placed with net owned funds for developing control over high leverages of borrower level. Study also revealed that exchange of
 credit information among banks would be immense help to them to avoid possible NPAs. Management Information system and Market
intelligence should be utilized to their full potential. From the above literature review us the identify the variable as: Sound NPA Management
System Q.5. Do you think the elements considered for maintaining sound Non-performing asset management system are efficient?
4. 24. 12 2.6 Selvarajan B. and Vadivalagan G. (2013)39 considers that the problem of NPA is Not limited to only Indian public sector banks, but
it prevails in the entire banking Industry. Major portion of bad debts in Indian Banks arose out of lending to the priority sector at the dictates of
politicians and bureaucrats. If only banks had monitored their loans effectively, the bad debt problem could have been contained if not
eliminated. The top management of the banks was forced by politicians and bureaucrats to throw good money after bad in the case of
unscrupulous borrowers. The authors estimates that the Agriculture advances have registered a 7 fold net increase, SSI advances have set
are cord net increase of 8.5 times and the advances to other priority sector have made ante increase of 4.5 times, that of their respective
figures in 2001–02. From the above literature review us the identify the variable as: bad debt problem Q.6.Do you think the monitoring of loans
effectively would reduce bad debt problems? 2.7 Ahmad Zahoor and Jegadeeshwaran DM. (2013)40 was undertaken a study to study the
non-performing assets of nationalized banks. The reason being mounting non- performingassets (NPAs), NPA account not only reduces
profitability of banks by provisioning in the profit and loss account, but their carrying cost is also increased Which results in excess & avoidable
management attention? Apart from this, a high level of NPA also puts strain on a bank’s net worth because banks are under pressure to
maintain a desired level of Capital Adequacy and in the absence of comfortable to assess the health of various categories of loan assets in
various categories of banks. The data was collected for a period of five years and analyzed by mean, CAGR, ANOVA and ranking individual
banks. The individual banks got ranks as per their performance in management of NPA‟s. It was also tested, whether there is significant
difference between non-performing assets of banks, it was found that there is significant difference in the level of NPA‟s of nationalized banks
which reflect their varied efficiency in the management of nonperforming assets.
5. 25. 13 From the above literature review us the identify the variable as: ranking individual banks Q.7.Do you think the measurement of Non-
performing asset management is the only tool for ranking individual banks for their overall efficiency? 2.8 Rajeshwari Krishnan (2002)4
focused on the problem of swelling non- performing Assets in banks and financial institution of the country becomes more and more Un-
manageable and created threats for the financial sector. She found that securitization can be used for the liquidating the illiquid and long terms
debut like loan receivables of the financial institutions or bank by issuing marketable securities against them. She concluded that the
SARFAESI Act is defiantly and big leap forward not only in the filled of NPA management but also promoting the securitizing market in India.
The act may be required to be fine-tuned to bring in ‘natural justice’. From the above literature review us the identify the variable as:
SARFAESI Act Q.8.Do you think the SARFAESI Act is enough for recovery of Non-performing assets of banks and other financial institutions?
2.9 Vasant Desai 32 In his book chapter "Non- Performing Assets" had concluded that the accumulation of huge Non- Performing Assets in
Banks and financial institution has assumed great importance. The depth of the problem of bad debts was first realized only in early 1990s.
The magnitude of
6. 26. 14 NPAs in Banks and financial institution is over Rs. 150000 crores. While the gross NPA reflects the quality of loans made by Banks, net
NPA shows the actual burden of Banks. Now it is increasingly evident that the major defaulters are big borrowers coming from non- priority
sector. The Banks and financial institution have to take the initiative to reduce NPA in a time bound strategic approach. The Government has
empowered the banks to take over the management of business of a borrower merely by publishing a notice in a newspaper. In India, it is
observed that the probability of success of such a strategy in much higher compared with the policy of debt transfer to AMCs. So it is
suggested that India should opt for the decentralized creditor-led strategy and adopt policies to create an amicably environment for the
success of such a strategy. However, in some Bank - specific cases, a time bound AMC can be conceived after meeting all the pre- conditions
of AMC - based restructuring, if need arises. From the above literature review us the identify the variable as: empowerment of the banks
Q.9.Do you think the government has empowered the banks to take adequate measures for recovery from defaulters? Bloem and Gorter
(2001)3 suggested that a more or less predictable level of nonperforming loans, though it may vary slightly from year to year, is caused by an
inevitable number of ‘wrong economic decisions by individuals and plain bad luck (inclement weather, unexpected price changes for certain
products, etc.). Under such circumstances, the holders of loans can make an allowance for a normal share of nonperformance in the form of
bad loan provisions, or they may spread the risk by taking out insurance. Enterprises may well be able to pass a large portion of these costs to
customers in the form of higher prices. For instance, the interest margin applied by financial institutions will include a premium for the risk of
nonperformance on granted loans. At this time, banks’ non-performing loans increase, profits decline and substantial losses to capital may
become apparent. Eventually, the economy reaches a trough and turns towards a new expansionary phase, as a result the risk of future
losses reaches a low point, even though banks may still appear relatively unhealthy at this stage in the cycle.
7. 27. 15 Rajeshwari Krishnan (2002)4 focused on the problem of swelling non- performing assets in banks and financial institution of the country
becomes more and more unmanageable and created threats for the financial sector. She found that securitization can be used for the
liquidating the illiquid and long terms debut like loan receivables of the financial institutions or bank by issuing marketable securities against
them. She concluded that the SARFAESI act is defiantly and big leap forward not only in the filled of NPA management but also promoting the
securitizing market in India. The act may be required to fine tuned to bring in ‘natural justice’. Rituparna Das (2002)5 performed a research on
Managing the Risk of Non Performing Assets in the Small Scale Industries in India. In this article the researcher tries to seek a solution to the
problem of NPA in the small scale industries under the present circumstances of banking and insurance working together under the same roof.
What is stressed in this article is the pressing need of the small-scale entrepreneur for becoming aware and educated in modern business
management holding a professional attitude toward rational decision making and banks have to facilitate that process as a part of the credit
policy sold by them Prashanth K. Reddy (2002)6 in his research paper on the topic, “A comparative study of Non Performing Assets in India in
the Global context” examined the similarities and dissimilarities, remedial measures. Financial sector reform in India has progressed rapidly on
aspects like interest rate deregulation, reduction in reserve requirements, barriers to entry, prudential norms and risk-based supervision. The
study reveals that the sheltering of weak institutions while liberalizing operational rules of the game is making implementation of operational
changes difficult and ineffective. Changes required to tackle the NPA problem would have to span the entire gamut of judiciary, polity and the
bureaucracy to be truly effective. This paper deals with the experiences of other Asian countries in handling of NPAs. It further looks into the
effect of the reforms on the level of NPAs and suggests mechanisms to handle the problem by drawing on experiences from other countries.
8. 28. 16 U.N. Lakshman (2003)7 in his study pointed out the reasons for NPA’s in Indian bank. He started the reasons could be, diversion of the
bank fund, time/cost overrun while implementing the project, business failures like product failing to capture market, inefficient management,
strained labor relations, old technology and product obsolescence, recession in some foreign countries and adverse exchange rate
government policies toward excise, imports and exports , willful default frauds, misappropriations, deficiencies in the system of credit appraisal
monitoring and follow up, delay in settlement/ subsidies. He further mentioned some of the methods to recover NPAs they are Recapitalization
and asset reconstruction fund. He highlighted the steps taken 15 contain NPAs they are as following RBI stressed the need for credit appraisal
and credit supervision since the basic problem is at lone decision stage, stressed the need to monitor stock and operation and end use
statements, detailed guidelines have been issued to take steps to avoid sickness and also to nurse bake the align units, stressed the need to
constitute recovery cells, NPA management departments and fixed recovery target for banking units, the debt recovery tribunal should depose
off the issues within six months. It should be given freedom to regulate its own Procedure subject to the provision of the Act of 1993, on the
filling of suit in court law; the following guidelines are prescribed which registered and the enforceable. He made suggestions that areas which
created the problem, in most costs the barrowers are ot be found. The documents charging should with the bank including the location map of
properties. Must avoid expert’s orders to eliminate scopes for reopening the mater and also further litigation cost memo should be filled with in
7 days from the date of court order which includes application fee, advocate fee, insurance /go down /storage charges and other expenses
incurred by a bank. P.Rajaseker Reddy and D. Ramana Reddy (2003)9 made a conceptualized study in Andhra Pradesh in nonperforming
asset. They noticed that the internal and external courses for NPAs have included are many sector of industry. Failures to introduce financial
management , managerial deficiency over the estimation demand, underestimation of capital costs, delay in implementing project which result
is cost acceleration, of finance and working capital, surplus labor, recession in demand, inadequate availability of resources like relation
caused heavily industrial sickness which paned the way to the evaluation of NPAs in industrial sector. They figured out the problem of NPAs in
state and made some suggestion they are extending role of banks
9. 29. 17 and financial institutions not to keep their activity limited to financing but also to monitor the functioning of industry from time to time,
introducing entrepreneur training, counseling and guidance for the new entrepreneurs. Establishing a separate department of rehabilitation of
 NPAs which concentrates on diagnosing the reason for NPAs and to detect rehabilitation process by catering to economic, administrative,
technical and infrastructural help.They concluded that the growing industrial sickness among private, public an co-operative endeavors, certain
selections were suggested to encounter industrial sickness and to minimize the chances of evolution of NPA in any industry. The suggestions
are promotion and encouragement to traditional industrial depending upon the skill and workmanship of the workers engaged, reforming the
role of financial institutions not restricted only to lend finances but to act as guide and cocoordinator in functioning of the industry so as to help
them thrive, establishment of a separate and special department for rehabilitation of NPAS which mainly concentrates on and diagnoses the
reasons to economic, administrative, technical and infrastructure help. C.Sivarami Reddy and Smt.V.Kalavathi (2003)10 studied the reasons
remedies of non-performing assets, they found that the reasons for NPA were diversification of funds, mostly for expansion / diversification of
business like product / market failure, failure, inefficient management, inappropriate technology, labor unrest etc., changes in the macro
environment like recession, infrastructural bottle necks etc., time / cost over runs during project implementation, changes in government
policies, and delay in release of sanctioned limits by banks. They highlighted various steps for reducing NPAS they are, study the Problems of
NPA branch wise, amount wise and age wise, prepare loan Recovery policy and strategies for reducing NPA, create special cells at the Head
office / zonal office level to look after critical branches where NPAs are on the high side, select prepare technique suitable for the NPA and
monitor it in a time bound action plan. They concluded that NPA is not just a problem for banks they are bad for the economy. The money
locked up in NPA is not available for productive use and to that extent the banks seek to make provisions for NPA or write them off. Datta
Chaudhuri (2005)13 examined the “Resolution Strategies for Maximizing Value of Non-Performing Assets (NPAs)”. The article indicates that
declining capital
10. 30. 18 adequacy adversely affects shareholder value and restricts the ability of the bank/institution to access the capital market for additional
equity to enhance capital adequacy. So, if a resolution strategy for recovery of dues from NPAs is not put in place quickly and efficiently, these
assets would deteriorate in value over time and little value would be realized at the end, except may be its scrap value. The purpose of this
paper is to indicate the various considerations that one has to bear in mind before zeroing on a resolution strategy and provides a State -
Resolution - Mapping (SRM) framework. However, the paper has not specifically discussed about the various resolution strategies that could
be put in place for recovery from NPAs, and in particular, in which situation which type of strategy should be adopted. Bhatia (2007)15 in his
research paper entitled, “Non-Performing Assets of Indian Public, Private and Foreign Sector Banks: An Empirical Assessment”, explores an
empirical approach to the analysis of Non-Performing Assets (NPAs) of public, private, and foreign sector banks in India. The NPAs are
considered as an important parameter to judge the performance and financial health of banks. The level of NPAs is one of the drivers of
financial stability and growth of the banking sector. This paper aims to find the fundamental factors which impact NPAs of banks. A model
consisting of two types of factors, viz., macroeconomic factors and bank-specific parameters, is developed and the behavior of NPAs of the
three categories of banks is observed. Thomas P. Ferguson (2007)16 conducted a research on “Observations on the Securitization of Non-
Performing Loans in Russia”. Asset securitization is a burgeoning trend in Russia as companies burdened by poor credit ratings seek access
to capital at lower costs than they would be allowed in traditional equity or debt markets. Study indicates that securitization of these bad loans
has not occurred in Russia at the levels one might expect. This has been due to both a relatively small amount of loans that under-perform as
well as legal and regulatory impediments that have discouraged investors and lenders alike. The study has been conducted to examine the
expansion of consumer credit in Russia and the circumstances under which it is occurring indicate that the level of non-performing loans is
due to rapidly increase and as the rationale for maintaining the impediments that stand in the way of securitizing these loans is being re-
examined, those impediments are being scaled back to make way for market
11. 31. 19 participants to engage in such securitizations. Thus, this article anticipates a significant rise in the level of non-performing loans, which
will be logically paired with an increased interest of Russian lenders in securitizing these assets. Karunakar M., Vasuki K.and Saravanan S.,
(2008)17 made an attempt is made in the paper that what is NPA? The factors contributing to NPA, the magnitude of NPA, reasons for high
NPA and their impact on Indian banking operations. Besides capital to risk weightage assets ratio of public sector banks, management of
credit risk and measures to control the menace of NPAs are also discussed. The lasting solution to the problem of NPAs can be achieved only
with proper credit assessment and risk management mechanism. It is better to avoid NPAs at the market stage of credit consolidation by
putting in place of rigourous and appropriate credit appraisal mechanisms.

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of-banks [PDF]chapter ii literature review - Shodhganga. (n.d.). Retrieved june sunday, 2017, from
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%20Central%20Cooperative%20Bank.pdf: http://ijesc.org/upload/ad2b0219c9be7f594dd5bcbc2eb42196.Recovery%20Managem ent%20in%20Jaipur
%20Central%20Cooperative%20Bank.pdf RECOVERY MANAGEMENT IN BANKS new | sai subha - Academia.edu. (n.d.). Retrieved june saturday,
2017, from http://www.academia.edu: http://www.academia.edu/22468215/RECOVERY_MANAGEMENT_IN_BANKS_n ew
5. 64. 52
Recommended

Chapter plan of the study The study consists of six chapters: Chapter-1 is developed to the Introduction of the banking industry in India, Banking
sector reforms, NPAs and Indian banking sector, Loan procedure in public sector banks, meaning, classification and causes of NPAs, measure to
reduce NPAs, Securitization Act 2002 at its provisions. Chapter-2 deals with review of existing literature. The literature broadly refers to information
relevant to your topic of interest. Such works may deal specifically or more generally with your topic of interest. It describes, compares, contrasts
and evaluates the major theories, arguments, themes, methodologies, approaches and controversies in the scholarly literature on a subject. In a
literature review, your central focus is examining and evaluating what has been said before on a topic, and establishing the relevance of this
information to your own research. You may also identify what has not been said in the literature on a subject (this is called „a gap in the literature‟,
and filling such gaps with new knowledge is a particular interest of postgraduate scholarship). Chapter-3 Deals with the Research Methodology
covers the statement of the problem, Rationale of the study, Plan of the study, Data used and Limitations of the study. Chapter-4 This chapter deals
with the secondary data analysis. Makes the empirical analysis of the collected information related to trends in NPAs of PSBs, data related to
performance of the banks and sector wise NPAs before and after the enactment of Securitization Act 2002 with the help of percentage and
appropriate statistical tool like average, Standard Deviation, CAGR and ttest. Chapter-5 Analysis of Structured Questionnaire filled by the officers
and loan mangers regarding the role played by the Securitization Act 2002 with the help of tabulation and presentation of absolute figures,
percentage and appropriate statistical tool like average, Standard Deviation, Chi-square and ANOVA. Chapter-6 consists of the findings, suggestions,
further scope and conclusion of the study.

7.2 SUGGESTIONS The level of NPAs in the Indian Public and Private Sector Banks has reduced drastically both in absolute as well as percentage
terms. However, to bring the banks at par with international level and to retain this position in coming years, the following suggestions are offered.
The measures required to be undertaken are twofold; one, avoiding fresh addition of NPAs and two, recovering the amount from accounts which
have already turned as bad debts. 1. Banks should reformulate their credit appraisal techniques (credit monitoring). 2. Proper evaluation of loan
application helps in detecting the unviable projects. 3. The Information about industry, its financial position, management and other information
like financial stake, annual accounts, stock reports, etc. should be collected prior to sanction of a loan. 4. Industry-Bank Integrated Cell should be
established at the bank level in every branch. Banks should inspect the progress of the project or the business. 5. Some of the enactments related
to NPAs are several decades old and in quite a few cases, out of tune with present realties. These provision need to be amended urgently and some
new enactments are called for in order to cater to the requirements of the changed and for more complex current economic and Business
environment. In case of Legislation on Bank raptly or for closure; the related laws should be expeditiously implemented. In the mean time, at least
the special recovery measures available with SFC‟s should be made applicable to bank loans as well. 6. Special monitoring department should be
established in large braches for review of accounts and analyse the comparative statement, common size statement. Comparative risk and
compliance, terms and conditions of action. 7. The senior bank officials should be imparted specialized training at regular intervals to equip them
with latest procedures and practices of management of NPAs. 8. Proper perception and evaluation of risk is extremely important of Banks in case of
NPAs, like market risk, credit risk, liquidity risk, default risk, interest rate risk, fore risk and other risks. At present environment is Fraught with risks
of various kinds and dimensions, a tested and sound credit risk model needs to be put in a place by banks to hamper NPAs. 244 9. The Banks should
be motivated to set up specialized committee like Audit Committee, Risk Management Committee, and Compensatory Committee which will
strengthen the corporate governance. 10. The elimination of political interference in disbursement of loans to farmers, priority sector as well as
industrialists. 11. Complete ban on loan waivers to farmers and subsidized loan holders. 12. Collection of interest on loan from clients on a monthly
basis instead of quarterly collection. At branch level, the branch manager in particular should accept the responsibility for both bending and
recovery of huge amounts. 13. The Banks are to develop compromise strategies like establishment of recovery teams at district, village level and
satellite branch level. 14. The single window recovery system will help banks in making better loan recoveries. 15. Circulation of information among
defaulters by banks or bank groups, strengthening Settlement Advisory Committees (SACs), proper utilization of power vested on the banks under
the SRFAESI Act are empower the banks in their war against NPAs. 16. Direct recovery is the best indicator for reduction of NPAs close follow-up,
including periodical inspection of Units, borrower‟s education and sympathetic consideration of genuine problems of the borrowers will help banks
in making better loan Recovery. 17. General provisions may be required to be reported as a separated item „Capital and Reserves‟. The „Specific
provisions‟ may be required to be reported so as to facilitate arriving at “Provision Adjusted NPAs i.e. Net NPAs”. 18. The banks should strengthen
the internal control system through simplification of documentation procedures and revision in audit procedures, operational manuals and
implementation of related strategies and monitoring of their efficacy. 19. There is need for an integrated financial reporting system of NPAs in
banks. The Management information system (MIS) should clearly bring out the interrelationship between the volumes of NPAs, the cost and related
collections and disbursements so that the managerial decision-making may lead to improve in managing NPAs. 20. MIS can also be used as a
training tool for improving the skills of manager and other staff. As we are living in “Techno Era‟ an effective Management 245 Information System
(MIS) in organization has become panacea to exploit the opportunities and utilize its strength to combat the threats as well as its weakness of banks
in relation to NPAs. 21. Banks should introduce the new system of branch inspection emphasizing prompt rectification of irregularities and early
warning system for identifying incipiency of NPAs. 22. Form taking a cue that “Prevention is always better than cure”, the banks should accord
major thrust on preventive vigilance, revision of existing guidelines and formulation of new policies of many policies of many key aspects for better
 control and results of declining of NPAs. 23. As a measure of on-site surveillance, vigilance officers inspect branches. In case of any irregularities or
deviation are observed during the inspection, the same should be brought to the notice of Regional Heads for prompt corrective action. The above
suggestions may be considered, which would go a long way in further reducing the level of NPAs. Needless to mention here that reducing the level
of NPAs will not only considerably improve the profitability of the banks and improve the quality of assts, but also make the Indian banking system
stringent, resilient and geared to meet the challenges of global scenario. Apart from the preventive measures, there is need to strengthen the
existing legal system like SARFAESI Act, 2002 and Corporate Debt Restructuring (CDR) mechanism. Lastly, before declaring any bank as insolvent,
the policymakers may consider merging them with better performing banks, which would improve the asset quality of the bank and reduce the NPA
levels. 7.3 CONCLUSION As the sanctity of ethics and values is getting eroded and challenges and risks faced by banks and borrowers are increasing
because of fast changes taking place in business environment and the economy in the context of economic liberalization and globalization, the
possibility of some investment failures cannot be rules out both from banks‟ and borrowers‟ angle. In such a scenario, the presence of NPAs is
unavoidable and the only way to come out of this is to have the suggested Fund built up over a period of time. This will certainly prove to be a win-
win situation for all stake holders of banking including the major stake holders the Government. 246 This suggestion on implementation can
become an effective Regulatory Tool. It has to be noted that a good violently executed now in better than a perfect future plan. Time is always the
enemy, as it increases the repair bill exponentially. We have neither the time nor the money to experiment with the problem of ever growing NPAs.
The suggestions to contain NPAs inter-alia include making the banks more effective in appraisal, supervision and follow-up of loan accounts, making
the borrowers more accountable and responsible and strengthening and expending the legal machinery. Since the problem of NPAs emanates from
borrowers and it is problem of money, which ultimately money only can solve, a model has been developed through this study to find some
practical solution to contain the menace in future and at the same time strengthen the balance sheets of banks. The solution is simple and
practicable. Create a fund named Precautionary Margin Reserve, by recovering an annual levy in the range of 0.10%(i.e. approximately 10 paise for
every Rs 100/ borrowers by the client) from all standard advances, in a graded manner depending on the performance of borrowers reflected in the
conduct of their accounts. The model also recommends a contribution from the banks towards the said fund by away of paying compound interest
on the fund, to make them involve themselves, also share the burden of future NPAs and be more vigilant in the conduct of credit portfolio. The
fund should directly go to the liability side of the balance Sheet. Since it is in the nature of bank‟s owned funds, it can be considered for capital
adequacy purpose. Consequently the raising of subordinated debt which is a recurring liability and at a high cost can be avoided. It is envisaged
through this model that the rapport between the banker and the borrowers improves and the administration of credit portfolio is made more
effective, efficient and transparent and above all free from all possible malpractices like corruption, ever greening of advances, extending undue
favors and connected lending. The model is also expected to introduce an element of healthy competition among borrowers to maintain high
standards of dealings with banks reflecting in their sub-classification proposed under Standard Advances, for the purpose of levy. With this model in
force, borrowers will have a right to demand fair treatment and justice from bankers in a more standardized and transparent manner. The sub-
classification 247 under standard advances should become the benchmark rating for the borrowers for availing of special concessions/ incentives
from Government or any institution. The taxation rules can also be linked to this rating, so that borrowers will have the inclination and incentive to
be more responsible and accountable. Reprehensive bodies should insist on this Rating for all their members and Companies. Act should insist on
incorporation of this Rating in the Annual Accounts of corporate borrowers duly certified by auditors. The Job of Regulator is made easy as banks
can be evaluated on the basis of sub-classification of their standard Advances to NPAs can also be better monitored and recovery measures
intensified on NPAs. With the implementation of this suggestion, the balance sheets of banks would emerge strong, enhance the confidence of
banks, thus facilitating them to have better general image and reputation in the market and improve their all round business potential particularly
the loan portfolio. With improvement in confidence level everything else improves.

To get out of debt , you need a plan and you need to execute that plan. To help, the Credit.com team shares these 8 ways
you can approach how to pay off debt and leave some, if not all, of your financial burden behind:
1. Gather your data—bills, credit reports, credit Score, etc.
2. Make a list of your debts and income
3. Lower your interest rates
4. Pay more than you have to pay
5. Earn more money
6. Spend less money
7. Create a budget and debt pay-off plan stick to them
8. Rinse and repeat

Keep this checklist where you can see—like your refrigerator door or your vision board, if you have one, and make it a goal
to check a task off the list regularly. More frequently if you want to lower your debt load more quickly.

1. Gather Your Data

To start to get out debt, start by knowing where you stand. You want to have a complete picture. Here’s what you need to
get:

 Your most recent bill statements for all credit cards and loans, including student loans.

 Your credit reports , so you can check for accuracy and identify all recorded debts.
 Your credit score   to find out whether you’re eligible to lower your interest rates or for a debt consolidation loan.

2. Make a List of Your Debts and Income

Once you have your data in hand, make a list of all your debts, being sure to include:

 Creditor’s name

 Balance

 Minimum monthly payment

 Interest rate

Next, list how much you need to pay in order to zero-out the debt’s balance within three years or whatever your target
timeframe is. Remember to include items not listed on your credit reports, such as family loans, medical bills and recurring
bills, such as groceries and utilities.

And know your monthly take-home pay. This is the baseline you have to work with toward paying down those debts and
buying groceries and such. The amount will also give you insight as to whether you need to take advantage of Ways 4 and
5 below—or how much you need to consider ways 4 and 5.

3. Lower Your Interest Rates

Interest on loans or credit cards can make trying to get out of debt seem like running a losing race. The more you owe, the
more interest you’re charged and the more you owe. And round the cycle goes.

If you find yourself with more credit card debt or debt from loans than you can handle, one way to at least start getting
ahead of that debt is to pay less interest if possible. Here are ways you might lower your interest rates.

Get a Credit Card with a Lower Interest Rate

Depending on your credit rating, you may qualify for a credit card that has a better interest rate than your current card.
Better yet, you may qualify for a credit card with an introductory 0% interest rate for 12 or months or more.

You need a credit rating of at least good for the best chances. If you don’t know what your credit rate is, you can  get your
free Experian VantageScore credit score and rating on Credit.com .
If your credit rating is good or better, look into a low APR credit card  and see if you can beat your current APR.

Here’s what a lower credit card interest rate can mean. Say you have a loan or credit card with a $5,000 balance, make
payments of $200 and don’t charge anything else to the card:

 At a 15.24% APR, you’re charged $1,054 for interest and will pay off the balance in 31 months.

 At a higher APR of 29.96%, you’re charged $2,937 and will pay off the balance in 40 months.

That’s a difference of $1,883 and 9 months of payments. Even lowering your interest rate a few percentage points can
make a big difference in how quickly you can get out of debt.

In that same scenario, if you paid an extra $50 a month, for a total of $250 a month, you would pay off the balance in 24
months at 15.24% APR and pay $805 in interest. At the higher APR of $29.96% you would pay off the balance in 29
months and pay $2,014 in interest. Paying just $50 extra a month could shave off 7 to 11 months of payments and save
you quite a bit in interest.
You may also be able to negotiate with your credit card issuer to get a lower rate  on your current card.
Get a Balance Transfer Credit Card with a Lower Interest Rate or 0% Intro Rate
Another option is to get a balance transfer credit card  with a lower interest rate and/or an introductory 0% APR. A balance
transfer card lets you transfer balances from your old card to the new card.

If that $5,000 balance on a card at even 29.96% can be transferred to one with 0% interest for 18 months, you that $1,498+
in interest each month. And if you put that money saved, toward the card’s balance, you pay the full $5,000 balance off in
just 7 months!

Get a Loan with Lower Interest Rate

Another option to get rid of high-interest debt is a personal loan, other loan or home equity line of credit that has a lower
interest rate. Personal loans  often charge lower interest rates than credit cards. And, and if you have a home and can tap
into its equity, you can get an even better interest rate.
If your car loan is the cause of your debt, you may be able to  refinance a high-rate auto loan .
Consolidate Student Loans
If student loans have you in debt, look into student loan consolidation and income-based repayment at  StudentLoans.gov .
4. Pay More than You Have to
There’s no law that says you have to make only the monthly minimum payment on your credit card or loan. You can pay
more. However, if you pay your mortgage off early, make sure there’s no prepayment penalty.  And, for a loan, make sure
your extra payments go to the principal and not the interest.

Look at that $5,000 credit card bill to see how making more than the minimum payment can help. If your monthly payment
is $114, you’ll pay on that card for more than five years to pay it off. And you’ll pay a total of $7,292 with $2,292 in interest.

Up that $114 payment to $300 and the card is paid off in just 19 months and you pay only $642 in interest.

The same principle applies to any loan—a mortgage, a car loan or home equity line of credit.

5. Earn More Money

Another way to get out of debt is to earn more money. That doesn’t have to mean a new job or a raise—although those
would help. It can simply mean taking on a side gig or other tactic to add some extra money  for a time.

One of the Credit.com staffers walks dogs on the weekend for a few extra dollars.

Other options include taking online surveys, Acorn , an online app that lets you automatically invest your spare change and
doing odd jobs, even babysitting, one day a week.
6. Spend Less Money
The flip side of earing more is spending less. Ideally, depending on how far out of debt you need to get, you might do both.
And there are a lot of ways to save a little  that can add up—from eating out one less day a week to skipping your morning
coffee out or taking your own snacks to the movies rather than paying $30 for popcorn, candy and a soda.

The extra money you save—just like any extra you earn—can go straight to paying down your debt.

7. Create a Budget and Debt Pay-Off Plan and Stick to Them

Before and again after you’ve gathered your total debt and have decided how much extra you can pay each month and
have adjusted interest rates and earning or spending, you want to have a goal and to know where you’re heading and how
you’re doing. A budget and/or a debt management plan or debt pay-off plan can help and they don’t have to be
complicated. In fact, many online banks and credit unions offer free budgeting tools.
 A budget shows you what you’re spending where and where it makes the most sense to put your money whether it’s from
interest saved or dollars earned. The latter becomes your debt pay-off plan. It can be a part of your budget or separate.

A good way to approach a debt pay-off plan is to take the total payoff number you calculated in Way number 2 and use it as
a goal to work towards by:

 Totaling the three-year or your chosen timeframe pay-off amount for all your credit cards.

 Adding the monthly payments for all other debts.

 Writing down the result as “Your Total Monthly Payment.”

Once you have that:

 Determine if you can afford to pay the Total Monthly Payment until your debt is paid off.

o If not, contact a credit counseling agency  and/or bankruptcy attorney for advice. Remember though, bankruptcy
has a huge impact on your credit score, and if you’re able to work out a payment plan with your creditors, it can be
avoided.
 If doable, pick one debt to pay off first . Start with paying off the debt with the highest interest rate or lowest balance. That’s
your “target debt.” Paying your target debt off first is known as the “debt snowball” or “avalanche” method.

 Set up “auto pay” for the required minimum payment for all but your target debt.

 Pay as much as possible toward target debt until that debt is paid off.

 Choose a new target debt and pay extra toward that one, and so on.

8. Rinse and Repeat

Once your budget and debt pay-off plan are in motion, don’t want to get too comfortable. Track your spending and habits
closely to make sure you’re making progress. And make adjustments when needed. Revisit your budget and adjust as you
can to stay the course until your debt is paid off.

Create an Emergency Fund

You may think that while paying off debt you don’t have money to save, but saving is important.  Life happens, and if
anything comes up, like a job loss, medical bill or car repair, you need to be able to cover it.

The suggested amount to have in an emergency fund  is three to six months’ worth of expenses. If that amount isn’t
possible, aim for one months’ worth, which is still a great starting point.
Whether you start saving now or pay some debt down first, make it a goal to have an emergency fund. As you pay down
your debt, you can shift some of the money you’re using to pay debt to pay yourself in the form of creating a  savings
account  for emergencies.
Stick to It
Just like losing weight, losing debt takes time. But diligence can make it happen. Don’t fret if you need to make adjustments
along the way or if you slip up. It’s not about a quick fix, it’s about taking control and changing your habits and behaviors so
you can achieve your financial goals.

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 Meet Our Expert

Gerri Detweiler focuses on helping people understand their credit and debt, and writes...  »

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