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Ramalingam

Ramalingam Kalirajan  |8940 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 11, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Jun 01, 2024Hindi
Money

Hi, i am now 31 and i am seriously in debt trap. My salary is only 60k but i am kind of messed up in payday loans which are not offering more than 30 days. So due to which i have to repay by taking loan against a loan. In this way i could see my repayment has become 3X of my monthly salary. Please suggest me what to do. I am feeling embarassed, as my family members doesnt know this. I need help and suggestions on how to overcome this. Even if i apply for debt consolidation, everytime i am getting rejected due to high obligations.

Ans: I totally understand how overwhelming this must be for you. Financial challenges can be tough, but with the right plan, you can overcome them. Let’s break this down step-by-step and get you on a path to financial stability.

Assessing Your Current Financial Situation
First, let’s assess where you stand. Your salary is Rs. 60,000 per month, but payday loans are eating up your income. Your repayment is 3X your salary, meaning you’re paying around Rs. 1,80,000 monthly. That’s a huge strain on your finances.

Understanding Payday Loans and Their Impact
Payday loans are short-term, high-interest loans. They can quickly spiral out of control if not managed properly. Because you’re taking new loans to repay old ones, you’re stuck in a debt cycle. It’s essential to break this cycle.

Immediate Steps to Take
1. Create a Budget

List all your income and expenses. Identify necessary expenses like rent, utilities, groceries, and transport. This helps you see where your money goes and where you can cut back.

2. Prioritize Your Debts

List all your debts with interest rates and due dates. Focus on high-interest debts first. This will save you more money in the long run.

3. Avoid New Loans

Stop taking new loans to repay old ones. This only deepens your debt. Focus on managing the existing ones.

Exploring Debt Relief Options
1. Contact Your Lenders

Explain your situation to your lenders. Sometimes, they can offer extended payment plans or reduced interest rates. They might be willing to help if they know you’re struggling.

2. Consider a Debt Management Plan

A debt management plan involves working with a Certified Financial Planner (CFP). They can negotiate with your creditors for better terms. This can help reduce your monthly payments and interest rates.

Increasing Your Income
1. Side Hustles

Consider taking up a side job or freelance work. Every extra rupee can help reduce your debt faster.

2. Sell Unnecessary Assets

If you have items you no longer need, sell them. This can provide a quick cash infusion to pay down debt.

Building a Financial Safety Net
1. Emergency Fund

Once your immediate debt crisis is under control, start building an emergency fund. This prevents future reliance on payday loans.

2. Savings Plan

Develop a habit of saving, even if it’s a small amount each month. This helps build financial security over time.

Seeking Professional Help
1. Certified Financial Planner (CFP)

A CFP can provide personalized advice and create a tailored plan to get you out of debt. They can also help you develop a long-term financial strategy.

2. Credit Counselling

Credit counselling services can provide support and advice on managing your debt. They can also negotiate with creditors on your behalf.

Emotional Well-being
1. Talk to Someone

Don’t bottle up your feelings. Talk to a trusted friend or family member. Sharing your burden can provide emotional relief.

2. Stay Positive

Remember, financial setbacks are temporary. With determination and the right approach, you can overcome this.

Educating Yourself on Financial Management
1. Financial Literacy

Learn about budgeting, saving, and investing. There are many resources online that can help improve your financial knowledge.

2. Avoid Future Debt Traps

Understand the pitfalls of payday loans and high-interest debts. Knowledge helps you make better financial decisions in the future.

Strategic Debt Repayment
1. Debt Snowball Method

Start by paying off the smallest debt first while making minimum payments on others. Once the smallest debt is paid off, move to the next smallest. This gives a psychological boost and keeps you motivated.

2. Debt Avalanche Method

Focus on paying off the debt with the highest interest rate first while making minimum payments on others. This saves more money on interest over time.

Long-term Financial Planning
1. Retirement Planning

Even though you’re in debt now, start thinking about your future. Investing in mutual funds can be a good way to build a retirement corpus.

2. Children’s Education

Plan for your children’s education early. This reduces the need for high-interest loans in the future.

Benefits of Mutual Funds
1. Diversification

Mutual funds pool money from many investors to buy a diversified portfolio of stocks and bonds. This reduces risk.

2. Professional Management

They are managed by professional fund managers who make investment decisions based on research and analysis.

3. Power of Compounding

Investing in mutual funds over the long term can significantly grow your wealth due to the power of compounding. Reinvesting earnings leads to exponential growth.

4. Liquidity

Mutual funds offer liquidity. You can redeem your investment anytime, subject to exit load and taxes.

5. Flexibility

Mutual funds offer various schemes to suit different financial goals and risk appetites. You can choose from equity, debt, hybrid, and more.

Risk Assessment in Mutual Funds
1. Market Risks

Mutual funds are subject to market risks. The value of investments can fluctuate based on market conditions.

2. Interest Rate Risks

Changes in interest rates can affect the value of debt mutual funds. Higher rates may decrease bond prices and vice versa.

3. Credit Risks

Debt funds face credit risks if the issuer of a security defaults on payments.

Categories of Mutual Funds
1. Equity Funds

Invest primarily in stocks. Suitable for long-term growth. They come with higher risk but offer higher returns.

2. Debt Funds

Invest in fixed-income securities like bonds. Suitable for conservative investors looking for stable returns.

3. Hybrid Funds

Invest in a mix of equities and debts. Offer balanced risk and returns. Ideal for moderate risk-takers.

4. Sector Funds

Invest in specific sectors like technology or healthcare. Higher risk due to lack of diversification but can offer high returns.

Active vs. Direct Mutual Funds
1. Actively Managed Funds

Managed by professionals who actively buy and sell securities. They aim to outperform the market.

2. Direct Funds

Invest directly without a distributor. Lower expense ratio but requires more research and knowledge.

3. Benefits of Regular Funds

Investing through a CFP ensures professional guidance. They help in selecting funds that align with your financial goals.

Final Insights
Dealing with debt can be daunting, but you can overcome it with the right approach. Assess your situation, create a budget, and prioritize your debts. Explore debt relief options and consider increasing your income through side jobs or selling assets.

Seek professional help from a CFP for personalized advice. Educate yourself on financial management to avoid future debt traps. Once your immediate crisis is managed, plan for long-term goals like retirement and children’s education.

Investing in mutual funds can help build wealth over time. They offer diversification, professional management, and the power of compounding. Understand the risks and choose the right category of funds based on your goals and risk appetite.

Remember, financial setbacks are temporary. With determination and a well-structured plan, you can achieve financial stability and peace of mind.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |8940 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 04, 2024

Asked by Anonymous - May 04, 2024Hindi
Listen
Money
Dear Sir, I am a 31 year old married man.I am in a huge debt trap of multiple loans plus credit card mounting around 9 lakhs. I work in MNC company earning 70k per month. Please advise or suggest if I can come out of this.
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.

..Read more

Ramalingam

Ramalingam Kalirajan  |8940 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 28, 2024

Asked by Anonymous - Oct 26, 2024Hindi
Money
Dear All, My age is 27 and I have a Job, however I am in debt which are going out of control. I reached my friends relatives to have some help for short period of time so that I can settle my loans but no one is coming to support. Banks are not offering debt consolidation loan. I am in dire stress, depression. I can simply loan if just get a debt consolidation loan but nothing available. Please suggest any way out of it. It is runing my life.
Ans: Being in debt can be overwhelming. A focused approach is essential to manage it effectively. Your determination to resolve the issue is commendable and is a solid first step.

Analyse Current Debts and Prioritise Payments

The first step is listing all current debts, including amounts, interest rates, and deadlines. This will help you get a clear picture of which debts need immediate attention.

List Debt by Interest Rates: Rank each loan or credit card by interest rate. Tackling high-interest debts first often saves more in the long run.

Focus on High-Interest Loans First: Prioritise high-interest loans, as they increase the debt burden more rapidly. Paying these off first can significantly reduce monthly interest costs.

Create a Realistic Repayment Plan

Having a clear, simple repayment plan eases financial stress. This plan can be aligned with your monthly income to manage cash flow efficiently.

Minimum Payments on Lower-Interest Debts: Pay only the minimum amount on low-interest loans while focusing on high-interest ones. This allows you to pay off critical debts faster without defaulting.

Consider a Fixed Payment System: Establish a regular, fixed payment that goes toward debt repayment. Over time, this system builds a routine and reduces total outstanding amounts.

Explore Alternative Income Sources

Increasing income during this period will help pay off debt faster and relieve financial strain. Small side-income activities can make a big difference over time.

Part-Time Work Options: Consider freelance or part-time opportunities that align with your skills. The additional income can go directly toward debt repayment.

Skill-Based Gigs or Online Work: Simple tasks like tutoring, content creation, or technical support can provide extra income without needing significant time investment.

Seek Non-Bank Loan Alternatives

Banks may deny consolidation loans, but other avenues could still offer help. Being cautious while evaluating options is essential to avoid any risk of high interest or hidden charges.

Speak with Credit Unions or Cooperatives: Credit unions or cooperative societies sometimes offer low-interest loans to members. These loans are more flexible and come with manageable terms.

Employer Advances: Check if your employer offers salary advances. Some companies have policies for interest-free loans to help employees in financial distress.

Debt Management with Financial Counsellors

If you’re feeling stuck, certified financial planners can guide you through debt management strategies. Working with a professional offers personalised solutions and often relieves stress.

Certified Financial Planners: Professionals can review your debt, income, and expenses to create a practical and sustainable plan. They also provide accountability, which can be encouraging.

Credit Counsellors: Credit counselling agencies help negotiate lower payments with creditors. They also offer structured payment plans, making it easier to handle debts without any new loans.

Develop a Spending Control System

Spending control can prevent the debt from rising further. Limiting unnecessary expenses will maximise funds available for debt repayment.

Basic Budget: Track expenses and avoid discretionary spending for now. Aim to limit spending to essentials until debts are under control.

Use Cash for Daily Expenses: Avoid credit card use for daily expenses. Paying with cash can curb spending habits and reinforce control over money.

Explore Peer-to-Peer Lending Options Carefully

Peer-to-peer lending (P2P) can be an alternative for small loans. However, these platforms charge high-interest rates, so use this option only after carefully reviewing all terms.

Low Principal Loans: If necessary, choose a minimal loan that can assist in paying off a specific debt. Ensure repayment within a short period to avoid a long-term commitment.

Avoid Long-Term Debt Cycles: High-interest P2P loans can lead to a cycle of debt. Use only for short-term needs and focus on paying off as quickly as possible.

Build a Positive Mindset

Debt can take a mental toll. Practising stress relief activities can help manage anxiety, allowing you to focus on repayment goals with a clearer mind.

Physical Activity and Breathing Exercises: Regular exercise and deep breathing exercises help reduce stress, making it easier to stay focused.

Reward Small Achievements: Celebrate small milestones, such as paying off a credit card or reducing a loan amount. Recognising progress keeps motivation high.

Consider Family Support Without Monetary Aid

Though family members may not offer direct financial support, they may assist in other ways, like providing emotional support or covering minor expenses temporarily.

Discussing Financial Strategies: Talk to family members about your goals. Emotional support helps alleviate stress and allows a more focused approach.

Temporary Shelter or Shared Resources: If feasible, moving in with family for a while or sharing resources can help reduce rent and other monthly costs.

Final Insights

Facing debt is tough, but with a structured approach, it is manageable. Focus on each step, be patient, and progress will come. Debt freedom is achievable with discipline and careful planning.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

Ramalingam

Ramalingam Kalirajan  |8940 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 13, 2025

Asked by Anonymous - May 13, 2025
Money
Hi sir, I am 29years old currently working in bangalore my monthly salary is 1,38000/- due to some personal family health reasons I have debts more than my montly salary atleast 188000 is required to pay only the PL loans and credit cards itself.. Is there any solution to get out of this debt trap...
Ans: You are 29, based in Bangalore, and earning Rs. 1,38,000 monthly.

You are in a tough phase now.
Your total EMI burden is Rs. 1,88,000 per month.

This is more than your salary.
That clearly shows a debt trap.

You are not alone. Many go through this.
But with strong steps, you can come out safely.

Let us now work on a 360-degree plan to regain control.

First, Accept the Reality with Calm
You are in a financial emergency.

This needs urgency, not panic.

You must stop all new borrowings now.

Borrowing more to pay EMIs will only worsen the trap.
A strong decision today helps your future.

Step 1: Prepare a Full Debt List
Write down every single loan and card.

Note principal, EMI, interest rate, and lender.

This includes all personal loans, credit cards, and dues.
Total it and understand where the pressure is coming from.

This gives you clarity and control.

Step 2: Categorise Loans by Urgency
Credit card debt is highest cost.

Personal loans are next priority.

Categorise like this:

High-interest (credit cards)

Medium-interest (personal loans)

Low or zero-interest (if any)

This tells you where to focus repayment first.

Step 3: Stop All EMI Auto-Debits Immediately
If your bank account is auto-debiting EMIs, pause it.

Let essential expenses like food, rent, and transport be safe.

Speak to banks and lenders.
Tell them about your cashflow issue.

Ask for a short break or restructuring.

Step 4: Approach Lenders and Request Settlement or Restructuring
Speak to each lender one by one.

Request EMI reduction, tenure extension, or one-time settlement.

Banks may agree to reduce interest or give grace periods.
If needed, give written letter with your salary slips.

Many banks offer restructuring under RBI guidelines.

This step is critical to stop the stress.

Step 5: Consider Consolidation Loan (Only After Advice)
Sometimes one loan can repay many small loans.

Interest may be lower than credit cards.

But this should be your last option.
And only after consulting a Certified Financial Planner.

Do not jump into it emotionally.

Step 6: Cut Lifestyle Expenses to Bare Minimum
Stop all subscriptions, dining out, gadgets, and shopping.

No vacations, new phones, or unnecessary travel.

Focus only on food, rent, power, and basic needs.
Even Rs. 5,000 saved monthly can go towards debt.

This lifestyle discipline will rebuild your foundation.

Step 7: Create an Emergency Survival Budget
Write your income and essential expenses.

Prioritise food, rent, utilities, transport.

See how much can be kept aside monthly for lenders.
This helps you build a negotiation base with banks.

Step 8: Sell Unused or Idle Assets
Do you have a second bike, gadgets, gold, or land?

Sell and repay part of loans immediately.

Even Rs. 1 lakh lump sum helps bring down credit card dues.
Don’t hold emotional value for things now.

Freedom from debt is worth more than any object.

Step 9: Get Help From Family or Trusted Friends
If your family or close friend can help, speak openly.

Don’t borrow, but ask for a support hand.

Explain the seriousness and give written repayment plan.
Use any help to pay off high-interest debt first.

Step 10: Increase Income Through Side Gigs
Try weekend freelance work or online skills.

Teach, write, design, or take delivery jobs.

Even Rs. 5,000 extra monthly can make a difference.
You are young and have time. Use it well.

Step 11: Stay Away From Credit Cards Completely
Credit cards give false comfort.

They multiply debt silently.

Cut and close them after full settlement.
Till then, avoid even swiping for Rs. 10.

Pay cash for all daily needs.

Step 12: Don’t Use Your Emergency Fund Yet
If you have one, keep it untouched.

Use it only for medical or survival situations.

Try to solve this debt issue with income and discipline.
Later, rebuild emergency savings as a priority.

Step 13: Get a Certified Financial Planner's Help
They can negotiate with banks for you.

They make proper repayment plans.

They guide on which loan to close first.
They also help protect your credit score.

Avoid solving this alone. You deserve expert help.

Step 14: Stay Strong Mentally and Emotionally
Don’t feel shame or guilt.

Health and family come first.

This is a temporary phase. It will pass.
But only if you stay calm and action-driven.

What Not to Do
Don’t take gold loan to pay credit card.

Don’t take payday apps or salary advances.

Don’t give up your job in stress.

These worsen your future. Choose logic, not emotion.

Final Insights
You are 29 and still very young.
But this situation needs action, not delay.

Debt of Rs. 1.88 lakh EMI on Rs. 1.38 lakh salary
is not sustainable.

You must reduce EMI or settle loans soon.

Pause all expenses. Talk to all lenders.
Start a new disciplined financial life.

With 12 to 18 months of focus, you can be free.
Then, you can invest and grow again.

Speak to a Certified Financial Planner today.
It is your first step towards peace.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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