24-Year-Old Student Overwhelmed with Debt, Seeking Urgent Advice

Ans: You are in a challenging financial situation, but it is possible to overcome it. You need a structured plan to manage your debts, reduce financial stress, and regain control of your finances. Below is a detailed step-by-step approach to help you come out of this debt burden.

Understanding Your Debt Situation
You have a total debt of Rs 33 lakh.

Your monthly salary of Rs 65,000 is entirely used for loan repayments.

You have a car loan of Rs 3.5 lakh, personal loans, and a credit card balance of Rs 2 lakh.

Your financial situation is tight, and you need an immediate plan.

Immediate Actions to Take
Stop taking any new loans, including top-up loans or balance transfer loans.

Avoid using credit cards for any new expenses.

List down all loans with their outstanding amounts, interest rates, and EMI amounts.

Prioritise high-interest loans for faster repayment.

Identify expenses that can be eliminated or reduced.

Increasing Your Cash Flow
Find ways to increase income through part-time work, freelance projects, or additional job opportunities.

Consider renting out a portion of your home if possible.

Sell any non-essential assets, such as extra vehicles, jewellery, or gadgets.

Discuss with your employer about any possible salary increment or bonus.

Loan Restructuring & Repayment Strategy
Credit Card Debt (Rs 2 lakh)
Credit cards have the highest interest rates (36%–48% annually).

Convert the outstanding amount into a personal loan with a lower interest rate.

Pay off this loan as quickly as possible.

Avoid using credit cards until all debts are cleared.

Car Loan (Rs 3.5 lakh)
Check if selling the car is a practical option.

If you can manage without a car, selling it will free you from the EMI burden.

If selling is not an option, negotiate with the bank for lower EMIs.

Personal Loans
Personal loans usually have high-interest rates.

Check if a bank offers loan restructuring for a lower EMI.

Prioritise paying off the highest-interest personal loan first.

Emergency Budget Plan
Cut down unnecessary expenses such as dining out, subscriptions, and luxury shopping.

Reduce discretionary spending to the bare minimum.

Shift to a frugal lifestyle temporarily until debts are cleared.

Consolidating Loans for Better Management
Approach your bank for a debt consolidation loan at a lower interest rate.

This will help reduce your EMIs and make payments manageable.

Avoid loans from unregulated lenders or loan apps.

Negotiating with Lenders
Banks and NBFCs offer loan restructuring options for financial hardship cases.

Request a lower EMI or an extension of tenure.

If you are struggling, some banks offer temporary EMI moratoriums.

Keep communication open with lenders to avoid default.

Income Tax Optimization
If you are paying a home loan, claim deductions under Section 80C and 24(b).

Reduce tax burden by using available deductions and exemptions.

Consult a tax expert if necessary to optimise savings.

Psychological & Emotional Well-Being
Debt stress can affect mental health. Stay positive and focused on solutions.

Seek support from family members if possible.

Do not fall into depression or financial anxiety. A solution is always possible.

Final Insights
Your debt burden is high, but with discipline, it can be cleared.

Focus on increasing income and cutting expenses aggressively.

Consolidate loans to lower interest rates where possible.

Pay off high-interest debts first, especially credit card debt.

Stay away from new loans and avoid unnecessary spending.

Financial struggles are temporary. With the right plan, you will come out of this.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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