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How to Get Out of Debt in India: A Step-by-Step Plan That Actually Works
Category: Personal Finance | Reading Time: 9 minutes | Last Updated: May 2026
Written by Alen
Disclaimer: This article is for educational and informational purposes only. It does not constitute financial advice. Please consult a qualified financial advisor for advice specific to your situation.
In the summer of 2021 I was carrying ₹2,17,000 in debt across three sources simultaneously.
₹84,000 on an HDFC credit card that I had maxed out during a period when my freelance work dried up during the second COVID wave. ₹78,000 remaining on a personal loan I had taken from Bajaj Finserv two years earlier for a laptop and some emergency expenses. And ₹55,000 borrowed from my cousin Vikram in Noida who had lent it to me without interest but with a quiet expectation that it would be returned before his daughter’s admission fees came due in August.
I was earning approximately ₹38,000 per month at the time from a mix of writing assignments and a part-time content role. After rent of ₹11,500 in Dwarka, groceries, transport, phone, and electricity — I had roughly ₹8,000 to ₹10,000 left at the end of each month that was theoretically available for debt repayment.
The problem was that the credit card’s minimum payment alone was ₹4,200. The Bajaj Finserv EMI was ₹3,100. After both of those I had ₹700 to ₹2,700 left for everything else — including the growing anxiety about Vikram’s August deadline that I was managing largely by not thinking about it.
I want to tell you that I had a moment of brilliant clarity that changed everything. I did not. What I had was a conversation with a colleague named Prashant who had paid off significantly more debt than mine in about eighteen months, and who sat with me for two hours one evening in a Karol Bagh café and walked me through exactly what he had done. This article is what I learned from that conversation — and from the fourteen months it took me to implement it.
Why Most Debt Repayment Advice Does Not Work in India
The advice that circulates online about getting out of debt was largely written for Americans with American salaries, American interest rates, and American access to balance transfer products and debt consolidation options that do not exist in the same form in India.
In India, credit card interest rates run between 36% and 42% annually — among the highest in the world. Personal loans from NBFCs like Bajaj Finserv, Moneyview, and KreditBee carry rates between 18% and 36%. The formal debt consolidation products available in the US — where you roll multiple debts into one lower-interest loan — are limited and hard to access here for most middle-income borrowers.
What works in India is a combination of ruthless prioritisation by interest rate, aggressive identification of every available rupee, and the kind of patient consistency that is unglamorous but is the only thing that actually moves the numbers.
Step 1: Write Every Debt Down — Every Single One
The first thing Prashant told me to do was write a complete list. Not in my head — on paper or in a spreadsheet. Every debt, with four pieces of information for each:
The lender name and type — HDFC credit card, Bajaj Finserv personal loan, cousin Vikram.
The current outstanding balance — not the original amount borrowed, but what you owe today.
The monthly minimum payment or EMI obligation.
The annual interest rate — the actual percentage, not the monthly figure that lenders sometimes advertise to make it look smaller.
When I did this exercise I discovered something I had been avoiding: the total was ₹2,17,000. I knew roughly this number but seeing it broken into specific rows with specific interest rates made something shift. The credit card debt at 40% annual interest was growing by approximately ₹2,800 per month in interest charges alone — even while I was making minimum payments. Every month I paid ₹4,200 and the balance barely moved because ₹2,800 of it was going straight back to interest.
This is the quiet devastation of high-interest debt that most people do not fully understand until they see it on paper. You can make payments every month without fail and your balance barely decreases because the interest is consuming most of what you pay.
Write the list. See the numbers. This is not optional.
Step 2: Understand the True Cost of Each Debt
Once the list exists, rank it by interest rate from highest to lowest.
Credit card debt in India at 36 to 42 percent annually is in a category by itself — it is genuinely the most expensive money most ordinary Indians will ever borrow. A ₹1,00,000 credit card balance on which you make only minimum payments will take over eight years to clear and cost you approximately ₹1,60,000 in interest — nearly double the original amount.
Personal loans from banks at 12 to 18 percent and from NBFCs at 18 to 28 percent are expensive but not catastrophic in the same way if they have a fixed EMI and end date.
Home loans at 8 to 9.5 percent and education loans at 8 to 12 percent are the cheapest formal debt available to most Indians and should almost never be prepaid aggressively — the interest rate is low enough that the money is better deployed elsewhere.
Informal debt — money borrowed from family or friends, typically at zero interest — carries no financial cost but carries significant relational cost that matters enormously in an Indian family context. More on this shortly.
Step 3: Choose Your Method and Commit to It
Prashant used what is called the Avalanche Method. It is mathematically the most efficient approach.
The Avalanche Method means paying minimums on every debt and directing every available extra rupee — every single one — toward the debt with the highest interest rate. When that debt is eliminated, the money that was going toward it rolls down to the next highest-interest debt. You continue until everything is cleared.
In my case this meant targeting the HDFC credit card first despite the fact that the Bajaj Finserv loan had a higher balance. The credit card’s 40% interest rate meant it was growing faster and costing me more per month than the loan at 22%.
The Snowball Method is the psychological alternative. You pay minimums on everything and target the smallest balance first regardless of interest rate. You get a faster win — one debt eliminated sooner — which research shows helps many people stay motivated through what is a genuinely difficult and long process.
I used the Avalanche Method because the math made me too uncomfortable to do otherwise. But I have known people for whom the Snowball worked better because the early win of eliminating a small debt gave them the emotional fuel to keep going. Choose the one you will actually maintain — the best method is the one you stick with.
Step 4: Find Every Extra Rupee Available
This is where most plans fail — not in strategy but in execution. You need actual money to direct toward debt, and finding it requires looking honestly at every area of spending.
What I actually cut during those fourteen months:
Swiggy and Zomato orders went from approximately five times a week to zero. This was harder than it sounds because food delivery had become my primary stress response mechanism. I replaced it with cooking on Sundays — making enough dal, sabzi, and rice for three or four days — which required building a habit I did not have. The saving was approximately ₹4,500 per month.
I cancelled my Netflix subscription (₹649) and my unused gym membership (₹1,200 per month, visited perhaps twice in the previous six months). Combined saving: ₹1,849.
I stopped attending social events that required spending money I did not have. This is culturally uncomfortable in Delhi where refusing a friend’s birthday dinner or a colleague’s farewell feels like a statement. I told two close friends what I was doing and they were more understanding than I expected. The others I told I was travelling that weekend.
I sold my old Oneplus 5T phone that had been sitting in a drawer since I upgraded. Got ₹4,200 for it on OLX after two days of negotiation with a buyer from Lajpat Nagar.
Total monthly freed-up amount across all cuts: approximately ₹7,800 to ₹8,500 per month that I redirected entirely to the credit card.
The side income piece:
I increased my freelance writing output on weekends — targeting fintech and health clients specifically because the rates are higher in those niches. This added approximately ₹6,000 to ₹9,000 per month in variable additional income, all of which went directly to debt and never entered my regular spending account.
Step 5: Handle Informal Debt With the Respect It Deserves
Vikram’s ₹55,000 was interest-free but it was not actually free. Every family gathering between March and August 2021 carried a specific texture of obligation that I cannot fully describe but that anyone who has borrowed from a family member in India will recognise immediately.
Prashant’s advice on informal debt was specific: do not treat it as lower priority simply because it carries no interest. The relational cost of not repaying a family member on time is real and in Indian family structures it can extend far beyond the two people directly involved.
I paid Vikram ₹10,000 in May, ₹15,000 in June, and cleared the remaining ₹30,000 in July — one month before his daughter’s admission fees were due. He did not make a scene about it. He did not need to. The texture of our conversations changed immediately after that last transfer.
Pay your informal debts with the same seriousness as your formal ones. The interest rate being zero does not make the debt cost zero.
Step 6: Negotiate With Formal Lenders if You Are Genuinely Struggling
If you are at a point where you cannot make minimum payments — not struggling, but genuinely unable — most Indian banks and NBFCs have processes for restructuring or settling debt that most borrowers do not know exist.
Call the bank’s customer care and ask specifically for the collections or settlement department. Not the regular helpline — the settlement department. Explain your situation clearly and ask what options are available. Banks often prefer a structured settlement over the cost and uncertainty of pursuing a defaulting borrower through legal channels.
Settlement offers typically come at 40% to 60% of the outstanding principal. They affect your CIBIL score significantly — a settled account stays on your credit report and is viewed negatively by future lenders. But if the alternative is defaulting entirely and having the debt go to a recovery agent, a settlement may be the more dignified and financially sensible exit.
Get everything in writing before paying a single rupee. Never make a settlement payment based on a verbal agreement over the phone. Never.
Step 7: Protect Your CIBIL Score While Repaying
Your credit score is not the priority while you are getting out of debt — getting out of debt is. But there are things you can do to minimise score damage without costing extra money.
Never miss a minimum payment. Even if you can direct only ₹500 extra toward your target debt, pay the minimums on everything else on time without exception. One missed payment damages your score more than many months of consistent payment repair.
Do not apply for any new credit while in repayment mode. Every application creates a hard inquiry that temporarily lowers your score and signals financial stress to any lender who checks.
Do not close accounts after you pay them off — particularly older ones. Account age contributes to your score and a long-standing account showing a zero balance is a positive signal.
Check your CIBIL report for free at CIBIL.com once every six months. Errors on credit reports are more common than most people realise — a loan incorrectly marked as outstanding, a payment incorrectly marked as late. Dispute any error you find directly on the CIBIL portal.
What the End Actually Looked Like
I made my final payment — ₹11,400 to clear the remaining Bajaj Finserv balance — in October 2022. Fourteen months after Prashant and I sat in that Karol Bagh café.
The total interest I paid across the entire repayment period was approximately ₹38,000 — money that went to the bank and the NBFC and produced nothing except the freedom to stop carrying what I had been carrying. I do not think of that ₹38,000 as lost money. I think of it as the cost of a lesson about credit cards and about the difference between income and lifestyle that I did not learn any cheaper way.
The month after my last payment I opened a Recurring Deposit for ₹5,000 per month — the same automatic transfer discipline I had built for debt repayment, redirected. That RD became the beginning of an emergency fund that now sits at four months of expenses in a liquid mutual fund.
The silence where the debt used to be is exactly what it sounds like. I still notice it sometimes, particularly on Sunday evenings that used to belong entirely to anxiety.
A Final Word
Debt in India is not a character failing. The combination of flat salaries, rising costs, aggressive lending by fintechs that made credit easy to access in 2019 and 2020, and the economic disruption of COVID created conditions in which millions of ordinary salaried Indians ended up carrying more debt than they could comfortably manage.
Getting out of it is not complicated. It is simple — not easy, but simple. Make the list. Rank by interest rate. Cut spending with genuine ruthlessness for a defined period. Find extra income. Direct every available rupee toward the highest-interest debt first. Repeat until the list is empty.
It took me fourteen months. It will take you a different amount of time depending on how much you owe, how much you earn, and how many extra rupees you can find. But the direction is always the same and the destination is always the same.
Start this weekend. Make the list first. Everything else follows from seeing the numbers clearly.
Disclaimer: This article reflects personal experience and general financial principles. It does not constitute professional financial advice. If your debt situation involves significant amounts, legal complexity, or recovery proceedings, please consult a qualified financial advisor or legal professional.
Alen is a Delhi-based writer covering personal finance, health, and career topics for Indian audiences. He has been writing about practical financial and lifestyle topics since 2020 and believes that clear, honest information should be accessible to every Indian regardless of background