i have payday loans worth 15 lakhs and not sure how to get out of this. I have a monthly salary of 2.10 lakhs after taxes but these loans eat most of my salaries. Multiple enquiries to financial institutions and banks not hit my credit score which is 765 but it has lead to rejections everywhere in getting fresh low to pay off all these payday loans. I am thinking of going to a cooperative bank and taking fresh loan to pay off these pay day loan guys

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

Ans: Understanding Your Situation
You have Rs. 37 lakhs in unsecured loans.

Your monthly salary is Rs. 50,000.

You have defaulted on all EMIs for the first time.

You took payday loans to manage past EMIs but fell into a deeper debt trap.

You approached a settlement agency but couldn't afford their fees.

You have no assets or external financial support.

Immediate Actions to Stop the Crisis
1. Stop Taking New Loans
Do not take another loan to pay existing EMIs.

Avoid payday loans, as their high interest worsens your situation.

2. Prioritise Loan Payments
List your loans in two categories:

High EMI & Payday Loans: (e.g., Kreditbee, Instamoney, Kissht, Phocket, Rupeeredee, Ramfincorp)
Other Personal Loans: (e.g., Muthoot, Kotak, Fullerton)
Focus on repaying payday loans first, as they have extreme interest rates.

3. Negotiate with Lenders
Contact all lenders and explain your financial situation.

Request a moratorium or restructuring to reduce EMIs.

Many lenders prefer lower EMIs over defaults.

Request waiver or reduction of penalties.

4. Avoid Settlement Agencies
Agencies demand high upfront fees, worsening your financial stress.

You can negotiate with lenders directly for better terms.

5. Increase Monthly Income
Find a side job, freelancing, or gig work for extra income.

If possible, request overtime or salary advance from your employer.

Consider renting a room or shared living to reduce expenses.

Strategic Debt Repayment Plan
1. Minimum Payments for Essential Loans
Pay minimum dues on loans that cannot be negotiated.

Keep essential personal loans active to avoid legal issues.

2. Close Payday Loans First
These have high penalties and should be cleared first.

Negotiate one-time settlements if possible.

3. Debt Snowball or Avalanche Method
Snowball: Pay the smallest loan first for quick wins.

Avalanche: Pay the highest interest loan first to save money.

Choose what suits you best.

Legal Considerations
Loan defaults affect your credit score but do not lead to jail.

Lenders may pressure you, but harassment is illegal.

File a complaint if you face threats from recovery agents.

Seek legal help if you face extreme pressure. Some lawyers help for free.

Lifestyle Adjustments to Free Up Cash
Reduce unnecessary expenses like dining out, subscriptions, and shopping.

Move to a cheaper living space if possible.

Cook meals at home instead of ordering food.

Use public transport instead of cabs or bikes.

Final Insights
Your situation is difficult, but it can be fixed with discipline.

Avoid taking new loans at any cost.

Negotiate with lenders for lower EMIs.

Close payday loans quickly to escape their high interest.

Find additional income sources to speed up repayment.

Stay mentally strong and seek free legal aid if needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: HI Jitu,

In summary, you have 15 lakhs loans at 1% per day interest (= 365% per annum). No options to borrow from any other organized sources like Bank/NBFC. So monthly Interest is 4.5 lakhs.
Monthly Income is 2 lakhs.

This is called a Debt Trap, where your income is less than your outflow (debt), so you are in a negative balance always and keep borrowing to fill the gap. No point in going into the history of the situation but I hope this has been a big life lesson for you.

Borrowing against you Pension policy can be considered but depends on the company and note that this will be at a high interest rate.
Borrowing from PF funds is only under certain situations (e.g. illness, education, marriage) and so even that is ruled out.
I assume you have already considered all/any asset you may own to repay.

The solution cannot be a very simple one. But I can recommend a couple of options which you can see if they help. You plan should simple -
1. Find a source of funds to repay your current loans
2. Stay with bare minimum requirement for next few years and repay maximum amount towards new loan
3. Do not take any new loans and stay on track for next few years, no matter what.

With a salary of 2 Lakhs, you should take a hard look at your living expenses and cut out all except the basic necessities. At least on paper come up with a number that you can discuss with prospective lenders mentioned below. Give them confidence of your ability to pay back every month with a realistic number e.g. over 1 lakh per month. Make this as high as you can make it. Make compromises everywhere possible and evaluate each expense to see what you can eliminate for the next couple of years, except food and absolutely basic needs, compromise on everything else. And ensure you make this work no matter what. You will have to be strong willed to achieve this and make it work.

Check with any close friends/family members/relatives who will trust you and provide you with some loan and provide you with time to repay. Offer to pay them interest which is higher than FD but reasonable for you and you can go as high as 20% per annum. At 20% you can pay back 55~60K per month for 3 years and payback the loan with interest.

Assuming you have a bank account for direct salary deposit, approach the bank and explain your situation truthfully to them and request an overdraft/loan and offer them to recover an agreed amount at an agreed interest rate from your account directly as soon as your salary is deposited. Again the interest rate will be high but if this works, you will be on your way to recovery. Even if they offer an interest rate of 30%~40% per annum and recover in 3 years, your EMI will be around 62K~70K per month.

Approach your employer and discuss if a loan can be provided to you at a reasonable rate of interest and recovered from your salary each month. If you have been employed with them for over a year or longer, and if they consider to extend a loan this may be the best solution you can get. You can offer to sign a contract for this (stay with employer for a period or until loan is paid up).

Is there any other source of funds you can approach with a similar proposal then do so, as long as you can get a chance to payoff your current set of loans and have a manageable EMI amount to pay back over the next few years, just take the best option and keep every desire aside and stay focused on getting back on track.

Please note that borrowing from an alternate source is not going to work if you take a loan and relax after that. You have already impacted your CIBIL score which makes lenders stay away. Now your top priority will be to find a source of funds at reasonably high interest rate between 20% to 40% resulting in an EMI of 55K to 70K for 3 years, and ensure you do not default the payments and clear this ASAP. If you can pay higher amount each month, then do that and get out of these loans as quickly as possible.

With honesty and sincerity if you continue to stay on track, you can eventually start coming back to normal life where you can plan your expenses and save and invest too. But do remember to live within your means and save as much as possible. Over time build back your CIBIL score for future requirements.

Hope this is helpful in some way.

Thanks & Regards
Janak Patel
Certified Financial Planner.

Ans: You are 35 years old. You have two loans—business and personal. Your monthly income is Rs. 11,000. You are struggling to clear these loans. This is a tough stage, but not impossible to solve. With discipline and a step-by-step plan, you can come out of this burden.

Let’s go deeper into your situation. We’ll look at every angle—income, expenses, debt, and opportunity. A clear 360-degree financial plan is important now.

Understanding Your Current Financial Pressure
Let’s begin with clarity about where you stand.

You earn Rs. 11,000 monthly

You are repaying business and personal loans

Your fixed income is very low

No other income sources are mentioned

Expenses are likely eating most of your income

It is not possible to repay high EMI amounts with this income. The first goal is not to panic. The second goal is to fix the leak.

Your position is tough. But not hopeless. With strong steps, change is possible.

Review and Reduce Your Monthly Expenses
When income is limited, expenses must be checked strictly.
Take a notebook. Write down your monthly spending.
Be honest. Check for waste. Remove non-essential items.

Here is how to start:

List all food, travel, and personal costs

Stop online shopping and unnecessary subscriptions

Reduce electricity and mobile bills

Delay purchases that are not urgent

Eat home-cooked food

Use public transport if possible

Even saving Rs. 1,000–Rs. 2,000 monthly can help.
That amount can go towards extra loan payment.

List Down Both Loans Clearly
Next, you need to know your loans properly. Write on paper:

Loan type (business or personal)

Name of lender (bank, NBFC, private lender)

Total loan outstanding

Interest rate for each loan

Monthly EMI

Number of EMIs left

You must have a clear idea. Without this, no action can be taken.

Identify Which Loan Is Hurting More
Usually, personal loans charge higher interest.
Business loans may have longer tenure.

You must choose which loan to finish first.

This is how to decide:

If one loan has very high interest, target that first

If one loan is small in size, finish it to reduce pressure

Check if any loan has late payment charges

By focusing on one loan at a time, progress will be faster.

This method is called "loan snowball" strategy. It builds confidence.

Talk to Your Lender and Ask for Restructuring
Please don’t hide from your lenders. It makes things worse.

Instead, go and speak to them honestly.

Say that income is low and you want to repay fully, but need help.

Ask them:

Can EMIs be reduced by increasing tenure?

Can interest rate be lowered in any way?

Can you get a pause of few months (moratorium)?

Many banks support honest customers. They may give a relief option.

If you default silently, they may take legal action. So communication is very important.

Explore Small Extra Income Sources
Your salary is Rs. 11,000. That is too low for your age.

Can you try adding Rs. 3,000–Rs. 5,000 more?

Here are possible ideas:

Part-time tuition classes

Food delivery or driving

Data entry work from home

Helping a shop or local business

Selling any handmade item online

Extra income may seem small, but helps in debt closure.

Every rupee matters at this stage.

Consider Consolidating Loans
Sometimes, combining two loans into one can help.

If you have two lenders, and one charges less interest, ask for balance transfer.

This is what you can explore:

Combine loans into one personal loan with lower EMI

Choose longer tenure but lesser monthly EMI

Repay that single EMI with discipline

But this should be done only with guidance. Wrong lender may increase your pain. Take help from a Certified Financial Planner before doing this.

Avoid Taking More Loans Now
This is very important. Please do not take a new loan to pay old loan.

That is like falling into a trap.

Even if someone offers you quick money, avoid it.

It only increases your burden. Especially from private lenders or app-based loan companies.

Stay away from such offers.

Sell Unused Items to Raise Cash
This step may feel hard, but is very useful.

Check your home for:

Old gold ornaments

Spare mobile phones or electronic items

Furniture or cycles not in use

Any vehicle you can sell for cash

Use that money only to reduce loans. Not for any other use.

Even Rs. 10,000–Rs. 20,000 can reduce pressure.

You must get lean and focus only on becoming debt-free.

Ask Support from Trusted Family or Friends
Do not borrow from friends or relatives unless it is last option.

But if someone trustworthy can give you a small interest-free loan, it can help close one loan.

Take only what you can repay. Set written terms.

Do not spoil relationships for money. Keep everything transparent.

Set a 2-Year Debt Freedom Goal
Debt freedom will not happen in one month. But you can plan for 24 months.

Make a clear plan like this:

Step 1: Lower expenses

Step 2: Earn more from side work

Step 3: Target one loan first

Step 4: Avoid new loans

Step 5: Talk to lenders

Step 6: Track progress monthly

Keep a small diary. Update loan balance every 30 days.

When you see the balance reducing, your confidence grows.

If You Have Any Insurance Plans, Review Them
Check if you have old LIC, ULIP, or money-back policies.

If they are not giving good returns, and you’ve crossed 5–6 years, you may consider surrendering.

Surrender value can be used to clear a loan.

But this must be done with expert review. Do not stop any policy blindly.

If these are insurance + investment plans, and giving only 4–5% returns, it is better to exit.

Pure term insurance is cheaper and better for future protection.

Reinvest savings through mutual funds via a Certified Financial Planner.

What Not to Do in This Situation
Please avoid the following mistakes:

Don’t take gold loan or private loan to repay other loans

Don’t stop paying EMIs suddenly

Don’t ignore lender calls or notices

Don’t use credit cards or payday loans now

Don’t borrow from unverified online apps

These steps increase your problem. Focus only on recovery.

Once Loans Are Cleared – Plan for Future
You are now 35. Once loans are over, don’t stay without a plan.

Here’s how to rebuild:

Start saving at least Rs. 500 monthly

Open SIP in mutual funds through Certified Financial Planner

Build emergency fund of 3 months’ income

Get term life cover and health insurance

Slowly increase SIP as income grows

Avoid all unnecessary debt going forward

Debt freedom is not just about today. It’s about future discipline.

Finally
You are facing a hard time today. But this can change.

Take small steps. Reduce costs. Increase income. Target one loan at a time.

Talk to lenders. Sell unused items. Seek support where safe.

Avoid shortcuts. Don’t borrow again. Make debt freedom your only goal.

Track monthly progress. Write it down. Motivate yourself daily.

Once loans are cleared, don’t fall in trap again. Learn from today.

You will rebuild. You will recover. Stay focused. You can become debt free.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment