I'm 29 & drowning in 11.6L debt. How do I escape?

Ans: To tackle a significant debt of Rs. 70 lakhs, start by assessing finances and creating a budget to understand income, expenses, and debt obligations. Prioritize high-interest debt, negotiate with creditors for better terms, and consider consolidating debts for easier management.

Increase income through additional work, cut expenses, and seek advice from financial counsellors if needed. Stay persistent, celebrating small victories, and remaining focused on long-term financial goals. With dedication and a well-structured plan, it's possible to gradually overcome debt and work towards a more stable financial future.

Ans: I understand your concern about being in a debt trap, but there are steps you can take to address the situation and work towards financial stability:

Assess Your Debt: Start by listing out all your debts, including the outstanding amounts, interest rates, and minimum monthly payments. This will give you a clear picture of your financial situation.
Create a Budget: Develop a detailed budget that outlines your monthly income and expenses. Identify areas where you can cut back on spending to free up more money to put towards debt repayment.
Prioritize Debt Repayment: Focus on paying off high-interest debt first, such as credit card debt. Consider using the debt avalanche or debt snowball method to systematically tackle your debts.
Negotiate with Creditors: Reach out to your creditors to discuss repayment options. They may be willing to negotiate lower interest rates, waive fees, or offer a repayment plan that fits your budget.
Explore Debt Consolidation: Consolidating your debts into a single loan with a lower interest rate can make it easier to manage and potentially reduce your overall interest costs. However, be cautious and carefully evaluate the terms and fees associated with any consolidation offer.
Increase Your Income: Look for opportunities to increase your income, such as taking on a part-time job, freelancing, or seeking a higher-paying position within your company.
Seek Professional Help: If you're feeling overwhelmed or unsure about how to proceed, consider seeking assistance from a financial counselor or debt relief agency. They can provide guidance and support tailored to your specific situation.
Avoid Taking on New Debt: While you're working to pay off your existing debt, avoid taking on any new debt if possible. Stick to your budget and focus on living within your means.
It may take time and discipline, but with a solid plan and commitment to debt repayment, you can overcome your debt challenges and regain control of your finances. Remember to be patient with yourself and celebrate small victories along the way.

Ans: I understand your situation and the stress that debt can bring. Let's work through a plan to manage your debts effectively and create a stable financial future for you. I’ll break this down into clear steps, keeping it simple and easy to follow.

Understanding Your Financial Situation
You are earning Rs 45,000 monthly and have debts totaling Rs 5 lakhs. This includes Rs 3 lakhs in personal loan and Rs 2 lakhs in credit card bills. You are managing your monthly expenses but any unexpected expense leads you to additional debt. Let's tackle this step-by-step.

Setting Financial Priorities
First, we need to prioritize your financial goals:

Clearing high-interest debts.

Building an emergency fund.

Managing your monthly expenses effectively.

High-Interest Debt Repayment
Focusing on Credit Card Debt
Credit card debt usually has high interest rates. Prioritize paying off this debt first. Here’s how:

Debt Snowball Method: Pay off the smallest debts first. This builds momentum and keeps you motivated.

Debt Avalanche Method: Pay off debts with the highest interest rates first. This saves money on interest in the long run.

Choose the method that suits you best. The important thing is to stay consistent.

Personal Loan Repayment
Once your credit card debt is under control, focus on your personal loan. Personal loans usually have lower interest rates compared to credit cards. Continue making regular payments while avoiding new debts.

Budgeting and Expense Management
Creating a budget is essential. Here’s a simple approach:

Track Your Expenses: Monitor all your spending for a month. Identify areas where you can cut costs.

Categorize Expenses: Divide expenses into essentials and non-essentials. Prioritize essentials like rent, groceries, utilities, and loan payments.

Limit Non-Essentials: Reduce spending on non-essential items. This frees up money to pay off debts.

Building an Emergency Fund
An emergency fund helps cover unexpected expenses without resorting to debt. Aim to save 3-6 months of expenses. Here’s how to start:

Automate Savings: Set up an automatic transfer to a separate savings account every month.

Start Small: Even saving Rs 500-1000 per month can make a big difference over time.

Increasing Your Income
Consider ways to boost your income. This can help accelerate debt repayment and build savings. Some options include:

Part-Time Job: Look for part-time work or freelance opportunities in your field.

Skill Upgradation: Invest in courses to enhance your skills. This can lead to better job prospects and higher income.

Avoiding New Debts
It’s crucial to avoid taking on new debts. Here are some tips:

Use Cash or Debit Card: Avoid using credit cards for purchases. Stick to cash or debit cards to control spending.

Plan for Large Expenses: Save for big purchases instead of relying on credit. This prevents new debt accumulation.

Understanding Mutual Funds
Once your debts are under control and you have an emergency fund, consider investing. Mutual funds are a good option for long-term wealth creation. Here’s a brief overview:

Types of Mutual Funds
Equity Funds: Invest in stocks. They offer high returns but come with higher risks. Suitable for long-term goals.

Debt Funds: Invest in bonds and securities. They are safer but offer lower returns. Good for short-term goals.

Hybrid Funds: Combine equity and debt. They offer a balanced approach with moderate risks and returns.

Advantages of Mutual Funds
Diversification: Spread your investments across various assets. This reduces risk.

Professional Management: Managed by experts who make investment decisions on your behalf.

Liquidity: Easy to buy and sell. You can withdraw money when needed.

Compounding: Earnings are reinvested, leading to exponential growth over time.

Regular Review and Adjustment
Review your financial plan regularly. Adjust your budget and investments based on changing goals and circumstances. Here’s how to stay on track:

Monthly Review: Check your budget and expenses every month. Ensure you are sticking to your plan.

Annual Review: Assess your overall financial situation yearly. Adjust investments and savings goals as needed.

Seeking Professional Guidance
Consider consulting a Certified Financial Planner (CFP) for personalized advice. They can help you create a tailored financial plan and provide expert guidance. Remember, you’re not alone in this journey.

Final Insights
Managing debt while building a stable financial future is challenging, but with discipline and a clear plan, it’s achievable. Prioritize paying off high-interest debts, create a budget, build an emergency fund, and consider long-term investments like mutual funds. Stay consistent, review your plan regularly, and seek professional advice when needed. Your dedication to improving your financial health is commendable, and with these steps, you can achieve financial stability and peace of mind.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You are 28 years old with a salary of Rs 40,000 per month.

You have a personal loan of Rs 3.6 lakhs.

You also have credit card outstanding of Rs 8 lakhs.

You do not have any investments or other liabilities.

This situation feels stressful. But with right action, you can come out of it.

Let us now look at your issue from a 360-degree view.

1. Understanding Your Debt Structure

You are carrying two kinds of loans — personal and credit card.

Personal loan is structured. Fixed EMI and tenure.

Credit card dues are open-ended. Interest is very high.

Personal loan interest is about 12–15% usually.

Credit card interest is 36–48% yearly. This is extremely expensive.

The interest keeps increasing monthly if not paid in full.

Credit card debt is unmanageable if not controlled quickly.

Currently, your highest priority is credit card repayment.

Focus on reducing credit card debt first, not personal loan.

But you cannot ignore personal loan EMI also.

So balance is needed between the two.

Understand your total monthly repayment capacity.

This is the starting point of your recovery.

2. Analyse Your Monthly Budget in Detail

Your salary is Rs 40,000. First track all monthly expenses.

Write down every rupee spent — rent, food, transport, recharge.

Identify non-essential spending — like online shopping, food delivery, OTT.

Stop or pause all non-essential expenses immediately.

Keep expenses only for basic needs and EMIs.

Create a lean budget. Stay strict for next 24 months.

This sacrifice is temporary but necessary.

Try to save at least Rs 5,000–Rs 8,000 every month.

This saved amount will help in debt repayment.

Avoid using credit cards from now on. Cut them physically if needed.

Don’t use them even for emergencies. Find alternatives.

3. Your Current Repayment Capacity and Debt Burden

Your personal loan EMI must be around Rs 17,000 per month.

You may be paying minimum dues on credit card.

But this minimum amount only covers interest, not principal.

So credit card balance does not reduce. It grows every month.

Total debt is Rs 11.6 lakhs. But credit card is a big danger.

Your EMI burden is above 45% of your income.

This is very high for your income level.

There is urgent need to restructure or reduce this burden.

4. Take Help of Loan Consolidation Strategy

You must consolidate your loans now. This will reduce your interest.

Go to your bank or NBFC. Ask for personal loan top-up.

Try to get a loan of Rs 8 lakhs at 12–15% interest.

Use this to fully close the credit card debt.

You will then have only one EMI to manage.

Interest will reduce from 48% to 15%. Big relief.

Ask for 5-year tenure. This will reduce EMI pressure.

Even though you pay longer, total interest will be lower.

Do not hide your situation from the bank.

Show stable salary slips. Maintain your CIBIL score.

Try with your salary account bank first.

If they say no, try other NBFCs or banks.

Don’t go to loan apps or unregulated lenders.

Always go through formal financial institutions.

5. If Consolidation Fails, Go for Debt Settlement Negotiation

Sometimes, banks don’t give fresh loan if CIBIL is low.

In such case, approach the credit card company.

Speak openly. Tell them you are not able to repay fully.

Ask for one-time settlement.

They may waive off penalties and offer 20–30% discount.

This will hurt your credit score. But it helps reduce pressure.

Pay the negotiated amount in full. Then take NOC.

Keep written records and acknowledgement.

Be careful. Don’t get trapped by fake debt settlement agents.

Go through the official helpline of your credit card bank.

This is not the best route. But needed when things are tight.

Try settlement only if consolidation or refinance fails.

6. Find Additional Income Sources to Accelerate Repayment

Rs 40,000 may not be enough to handle such large debt.

You must try to increase your income.

Look for freelance work, weekend jobs, tuition, or online skills.

Even Rs 5,000 extra per month helps.

Sell unused items at home — gadgets, furniture, old phones.

Use this extra income only to reduce debt.

Avoid using it for spending. This requires mental discipline.

Work more now. Relax later.

Every extra rupee should go towards debt closure.

7. Avoid These Mistakes During This Period

Don’t apply for new credit cards or loans now.

Don’t ignore credit card bills. Minimum payment won’t help.

Don’t do balance transfer from one card to another.

Don’t use salary advance apps. They create more problems.

Don’t fall for “pay later” or EMI offers on shopping sites.

Don’t withdraw PF or life insurance funds.

Don’t ask friends for loans unless very close.

Focus on discipline. Not on short-term relief.

8. Build an Emergency Fund After Clearing Debt

Once your credit card and personal loan are paid, start savings.

Keep at least Rs 25,000 as emergency fund.

Don’t invest this money. Keep in liquid mutual fund or savings.

It protects you from going back into debt again.

Emergency fund is the first step in financial recovery.

Don’t touch it unless very necessary.

Keep adding Rs 1,000 every month after loan closure.

You will slowly build stability.

After that, start monthly investments. Even small SIPs are good.

9. Plan for Long-Term Financial Stability

You are only 28 years old. Time is on your side.

Learn basic money management. It will help forever.

After clearing loans, start investing for future.

Begin with actively managed mutual funds through a CFP-backed MFD.

Don’t go for direct mutual funds.

Direct funds give no guidance, no handholding.

At this stage, support is more important than low cost.

Regular funds through CFP-backed MFD offer better discipline.

You also get help in rebalancing and taxation.

Avoid index funds.

Index funds only copy markets. They can’t protect from big falls.

You need actively managed funds. They offer better strategy.

After debt is closed, invest with clear goals.

Start with small SIPs, then increase slowly.

Set goals like emergency fund, retirement, buying car, etc.

Review every 6 months. Don’t invest blindly.

Mutual funds are powerful. But only if used with care.

10. Credit Score and Future Borrowing Power

Your credit score will be affected now.

But you can rebuild it. Start today.

Pay all EMIs and bills on time.

Avoid cheque bounces or missed payments.

After loans are cleared, take a small secured credit card.

Use it monthly, and repay in full.

In 2–3 years, your score will improve.

Don’t feel bad. Many people go through this.

What matters is what you do now.

Change habits. Build better money control.

That is your real financial strength.

Finally

You are brave for facing your problem. That’s the first big step.

Rs 11.6 lakhs loan on Rs 40,000 salary is very tight.

But it is not impossible to overcome.

Stop spending. Start acting.

Try to consolidate your debt.

If not, negotiate settlement.

Pay credit cards first. Then personal loan.

Increase income. Cut lifestyle costs.

Don’t use credit again until recovery.

In 2–3 years, you can come out clean.

Then start savings, investments, and wealth building.

You are young. Life is in your favour.

But don’t delay action. Start from this month.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Restructure or Refinance Your Loan
Talk to your bank/financial institution about restructuring:
- Extend tenure to reduce EMI
- Negotiate better interest rate
- Switch to a lender offering lower rates (even 1–2% less helps!)
Goal: Bring EMI down to ?30,000–?35,000 range, freeing up ?10K–?15K monthly.


- Avoid new debt: No fresh EMIs, credit card spend, or buy-now-pay-later schemes.
- Shift to cash-based spending, cut subscriptions, and keep expense tracking tight.