Debt Trap: 39-Year-Old Woman Struggles With High EMIs

Ans: Managing a high EMI burden of Rs. 34,400 on a Rs. 36,000 salary is challenging. Immediate steps are necessary to reduce financial stress. Let’s address this comprehensively.

Understanding Your Debt Load
1. Evaluate Debt Composition

Review the interest rates for both loans.
Understand the remaining tenure and total outstanding amounts.
2. Identify High-Interest Debt

Personal loans typically have high-interest rates.
Focus on prioritising repayment of high-cost loans.
3. Assess EMI-to-Income Ratio

Your EMI-to-income ratio is nearly 95%.
Ideally, this should be under 40%.
Short-Term Solutions
1. Increase Monthly Cash Flow

Look for part-time work or freelance opportunities.
Generate additional income to cover living expenses.
2. Reduce Monthly Expenses

Cut non-essential spending immediately.
Focus on basic necessities until your situation stabilises.
3. Restructure Existing Loans

Approach your lender for restructuring options.
Extend tenure to lower monthly EMI.
4. Consolidate Loans

Consider consolidating both loans into one with a lower interest rate.
This can simplify repayment and reduce EMI.
Medium-Term Strategies
1. Create a Budget

Track all income and expenses diligently.
Allocate every rupee to ensure repayment is on track.
2. Negotiate with Lenders

Explain your financial situation to the bank.
Request reduced interest rates or temporary relief.
3. Use Emergency Savings (If Any)

Utilise existing savings to repay a portion of the debt.
Focus on high-interest loans for maximum benefit.
4. Avoid New Debt

Do not take additional loans or credit cards.
Focus solely on repayment.
Long-Term Steps for Financial Stability
1. Build an Emergency Fund

Start saving once debt reduces.
Aim for at least 3–6 months of expenses as a buffer.
2. Learn Financial Discipline

Avoid unnecessary borrowing in the future.
Plan major expenses well in advance.
3. Seek Professional Help

Consult a Certified Financial Planner for tailored advice.
Create a roadmap for debt elimination and wealth creation.
4. Focus on Income Growth

Invest in skill development to increase earning potential.
A higher salary can ease debt repayment significantly.
Risks of Default
1. Impact on Credit Score

Defaulting on EMIs can severely damage your credit score.
A poor credit score affects future loan eligibility.
2. Legal Consequences

Lenders may initiate recovery actions if EMIs are missed.
Avoid default by restructuring loans or seeking assistance.
Final Insights
Your current financial situation requires immediate and structured action. Start by increasing cash flow, reducing expenses, and restructuring your loans. Over time, focus on financial discipline and income growth. A Certified Financial Planner can help you create a personalised debt repayment strategy and guide you towards a stable financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: Hello;

You may sale some of your asset to repay the loan.

Except home loan, no other loan is worth it except maybe education loan or some emergency.

Also make sure at NO time the total loan EMIs don't exceed 35-40% of your net monthly income.

Also make sure to have 6 months of regular monthly expenses as emergency fund.

You may seek help of family and friends to repay the loan and return back to them whenever feasible.

Check if restructuring of the loan is possible to lessen EMI burden but lengthen the repayment period.

If possible your spouse may take up some job till the loan is repaid.

While managing personal finances always keep in mind the age old saying, cut your cloth according to your size.

Best wishes;

Ans: Your debt is high, and your income is low. Paying EMIs on time has become difficult. This situation needs an urgent plan.

You are not alone. Many people face similar financial struggles. With the right steps, you can come out of this stress.

Assess Your Debt Situation
Total loan and credit card debt: Rs 20 lakh.

Monthly income: Rs 30,000.

EMIs and credit card bills are unmanageable.

Stress is increasing due to financial burden.

The first step is to stop taking new loans or using credit cards.

Prioritise Your Debts
Credit card debt has the highest interest (30-40% per year).

Personal loans have high EMIs and penalties for delays.

Secured loans (home, car) should be managed to avoid asset loss.

Focus on clearing high-interest debts first.

Negotiate with Banks and Lenders
Contact your bank and request a loan restructuring.

Ask for a lower EMI with a longer repayment period.

Request a moratorium (temporary pause on EMI) if needed.

Convert credit card dues into an EMI loan with a lower interest rate.

Negotiate for a settlement if repayment is impossible.

Banks prefer to restructure loans rather than declare them as defaults.

Debt Consolidation Options
If you have a low-interest secured loan option (like a gold loan), consider using it to clear high-interest credit card debt.

Avoid taking another personal loan to clear old debts. It will worsen your situation.

Increase Your Income
Look for part-time or freelance work for extra income.

If possible, sell unused assets (bike, gadgets, jewelry) to reduce debt.

Discuss with family members for temporary financial help.

Cut Unnecessary Expenses
Reduce spending on non-essential items.

Stop using credit cards immediately.

Follow a strict budget and use cash or debit cards for expenses.

Seek Professional Help
A Certified Financial Planner (CFP) can help create a repayment plan.

If stress is overwhelming, consult a financial counselor or mental health professional.

Final Insights
Your situation is difficult, but a step-by-step plan will help.

Stop new loans and credit card usage immediately.

Contact banks to negotiate for lower EMIs or settlement options.

Increase income through extra work and reduce expenses.

Seek guidance from a Certified Financial Planner.

You are not alone. With the right approach, you can come out of this financial struggle.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

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