How to Get Out of Debt: A Practical India Guide

Short answer: List every loan, attack the most expensive debt first while paying minimums on the rest, avoid taking on new high-cost borrowing, and build a small buffer so you stop relying on credit.

See the Full Picture

Write down every debt — credit cards, personal loans, car loan, home loan, buy-now-pay-later balances — with its outstanding amount, interest rate and EMI. You cannot fix what you cannot see, and the interest rates will usually show you exactly where the damage is.

Kill the Expensive Debt First

Credit-card revolving balances and many personal loans carry the highest interest, so they cause the most harm. Direct every spare rupee to clearing the highest-rate debt first while paying the minimum on the rest. Mathematically this saves the most money.

Consider Consolidation Carefully

Replacing several high-cost debts with one lower-rate loan, or transferring a card balance to a cheaper option, can help — but only if you stop adding new debt. Consolidation that frees up a card you then re-spend on makes things worse.

Cut the Inflows of New Debt

Pause discretionary spending, avoid the EMI-on-everything trap, and never pay only the minimum on a credit card, which keeps you in a costly cycle. Build a small emergency buffer so an unexpected bill does not push you back to borrowing.

Get Help Before It Spirals

If EMIs are unmanageable, talk to your lenders about restructuring before you default, since defaults wreck your credit score for years. The goal is to become debt-free on high-cost loans first, keep only cheap, productive debt like a home loan, and stay there.

Sources: RBI Financial Literacy

This explainer was written by The Dispatch desk to answer a question readers commonly ask. It is general information, not personalised financial advice.