Sir my monthly salary is 20625 and I took a personal loan of 300000 lacs multiple loan app last 2 year and I have credit card also but with my daily expenses I couldn't pay the total emis and bills so I took some credit from cred application it's almost 100000 lacs and now I'm unable to pay any of them as my salary is very low to pay so many emis I can't stop thinking about all this I'm facing anxiety and depression due to debts. I want to come out of this debt and get clean from all this problem. I want to save money and live a normal life. I couldn't share it with anyone also. My father us retired and he couldn't help me.
Ans: You’re facing a tough financial challenge, and it’s understandable. Managing multiple loans and credit card debts on a low salary is stressful. You’ve taken a loan of Rs. 3,00,000 and additional credit of Rs. 1,00,000, leading to overwhelming EMIs. Your daily expenses make it hard to manage these debts, causing anxiety and depression. Let's explore a plan to get you out of this situation and towards financial stability.
Prioritising Mental Health
First and foremost, your mental health is crucial. Financial stress can take a heavy toll. Please know that you’re not alone, and it’s okay to seek help. Talking to a trusted friend, family member, or professional can ease the burden. Remember, mental well-being is as important as financial stability.
Assessing Your Debts
Let’s break down your debts:
Personal Loans: Rs. 3,00,000
Credit Card Debt: Rs. 1,00,000
Your total debt stands at Rs. 4,00,000. Given your monthly salary of Rs. 20,625, this debt load is unsustainable. The first step is to understand the exact EMIs and interest rates associated with each loan and credit card.
Creating a Debt Repayment Plan
1. List All Debts
Write down all your debts with their respective EMIs, interest rates, and remaining balances. This helps you see the full picture.
2. Prioritise High-Interest Debts
Focus on paying off high-interest debts first, usually credit cards. These debts grow faster due to high interest, making them harder to repay if not tackled early.
3. Debt Consolidation
If possible, consolidate your loans. This means combining all your loans into one with a lower interest rate. It simplifies repayment and reduces the overall interest burden. Contact your bank for options. They may offer a consolidation loan.
4. Negotiate with Creditors
Approach your creditors and explain your situation. Sometimes, they can offer reduced EMIs, lower interest rates, or extend the loan tenure. This can ease your monthly payment burden.
5. Avoid Taking More Loans
It’s crucial to stop borrowing more money. Avoid any more personal loans or credit. Taking more loans will only worsen your financial situation.
6. Automate Payments
Set up automatic payments for your EMIs. This ensures that you don’t miss payments and incur late fees, which add to your debt.
Cutting Down Expenses
1. Create a Budget
List your essential expenses—rent, groceries, utilities—and allocate your salary accordingly. See where you can cut down unnecessary spending.
2. Reduce Discretionary Spending
Limit spending on non-essentials like dining out, entertainment, and shopping. Redirect this money towards paying off your debt.
3. Focus on Essentials
Stick to spending on essentials only. Avoid any luxury purchases until your financial situation improves.
Exploring Additional Income Sources
1. Part-Time Work
Consider taking up part-time or freelance work. Even a few extra hours a week can significantly increase your income, helping you pay off debts faster.
2. Sell Unnecessary Assets
If you have items at home that you no longer need—gadgets, furniture, etc.—consider selling them. The extra money can be used to pay off debts.
3. Rent Out Space
If you have extra space in your home, consider renting it out. This could bring in additional income to help with debt repayment.
Building an Emergency Fund
Even while paying off debts, it’s essential to build a small emergency fund. Start with a goal of Rs. 5,000. This fund is for unexpected expenses, so you don’t need to rely on credit cards or loans in emergencies.
Planning for the Future
1. Start Small Savings
Once you’ve stabilised your debt situation, start saving a small portion of your income. Even Rs. 500 a month can make a difference over time.
2. Invest Wisely
When you’re ready, consider investing in mutual funds through a Certified Financial Planner (CFP). Start with small SIPs. These offer better returns than traditional savings methods like FDs.
3. Focus on Long-Term Goals
Think about your long-term financial goals—buying a house, retirement, etc. Start planning for these once your debts are under control.
Final Insights
You’ve acknowledged your financial difficulties, which is the first step toward solving them. With a structured plan and disciplined approach, you can overcome this challenge. Focus on repaying high-interest debts first, reduce unnecessary expenses, and explore additional income sources. Building a small emergency fund and planning for future investments are also key steps.
Remember, there’s a way out of every problem. It might take time, but with persistence, you can regain control over your finances and live a stress-free life.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in