How much is enough? The first question you have to answer is how much debt can you incur. A simple thumb-rule: lenders consider you a credit risk, only if you have less than 50% of your disposable income tied up in fixed outflows like debt repayments. For an example, if your take-home salary after tax is Rs. 10,000, then the repayment should be less than Rs.5,000. If you pay more than Rs. 5,000, then your credit rating is poor.

Resort to negotiation: Retail debt is the most passive debt in India. Customers accept and pay (interest/fees) whatever the financial institution demands of them. What never strikes a borrower is that there is enough scope for negotiation. For instance, the annual fee for a credit card can be negotiated downwards based on the bank's earlier experience on your perfect credit discipline.

This applies to loans too! Just remember that the cost of acquisition of a new customer is very high for the lenders. But the credit risk component can be considered low in the case of old customers and therefore the lender can always offer some reduction in interest rates to a good customer.

Switch to cheaper loans: When interest rates keep falling it is advisable to switch to cheaper loans. This is specially so in the case of a Housing Loan as the period of repayment is long. You can save substantially if you reduce the interest rates.

You could shop around to find the banks and financial institutions that offer housing loans. If you feel it is too much of a trouble, then approach your own bank and demand a reduction in the interest rates. If you are a good customer then they would definitely oblige you instead of losing you to another lender.

Use your savings to retire debt: If you have an outstanding balance in your credit card you would be paying between 36-40 per cent interest per annum. If you have enough money in your savings bank account, then it is better to use it to pay off the credit card dues. For instance, on an outstanding balance of Rs.5, 000 the total repayment would be anywhere between Rs.6, 800 to Rs.7, 000 at the end of one year.

Use your credit card to your advantage: Pay special attention to the credit facilities offered by your credit card. Some cards will invariably will give you about 35-45 clear days between the time of purchase and the due date In other words you can enjoy a loan with zero interest and even consider this as a discount earned on your purchase.

Avoid defaults: Some institutions like the Housing Development Finance Corporation and the State Bank of India will collect and share information on the credit record of borrowers. Therefore, your reputation as a good or a bad borrower will be well known among the circle of lending institutions. If your credit record has been good, then you will not need Lady Portia to plead your case, in case of an unforeseen exigency. Lenders nowadays don't want their pound of flesh: an earnest customer will do just fine.

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