How to Get Out of Debt: A Practical Plan for Indians

Being in debt can feel like you're trapped. The constant stress, the sleepless nights, the feeling of your salary disappearing the moment it arrives—it's a heavy emotional and financial burden. It can make you feel like you're falling behind while everyone else is moving forward.

If this sounds familiar, please know this: you are not alone, and your situation is not permanent. Getting out of debt is not impossible. It requires a clear plan, unwavering discipline, and some temporary sacrifices, but the freedom you will feel on the other side is worth every bit of the effort.

This is not just a list of tips; this is a practical, step-by-step plan to help you tackle your debt head-on and begin your journey toward becoming debt-free. ⛓️➡️🎉

Step 1: Face the Numbers (The Uncomfortable Truth)

The first step is the hardest, but it's the most critical. You have to stop avoiding the problem and face the numbers head-on. Take a deep breath, grab a notebook or open a spreadsheet, and create a "Debt Inventory."

List every single debt you have. For each one, write down:

• The Lender (e.g., HDFC Bank Credit Card, SBI Personal Loan, Bajaj Finserv EMI Card)
• The Total Amount Outstanding (the full balance you owe)
• The Minimum Monthly Payment (your EMI)
• The Interest Rate (APR %) - This is the most important number!

Seeing the total amount you owe will likely be a shock. That's okay. This clarity is the starting point. You cannot fight an enemy you cannot see.

Step 2: Create a Bare-Bones Budget and Stop New Debt

To fight debt, you need ammunition, and that ammunition is cash. You need to free up as much money as possible from your monthly income.

Action 1: Create a "Debt-Free Budget." Forget the normal rules for a while. You need to be aggressive. Start by tracking every single rupee you spend. Cut down ruthlessly on your "wants"—eating out, subscriptions, shopping, entertainment. Every rupee you save is another soldier in your army against debt.

Action 2: Stop Accumulating New Debt. You cannot dig your way out of a hole if you keep digging. Stop using your credit cards immediately. Some people literally cut them up (while keeping the account open, as closing it can hurt your CIBIL score). At the very least, remove them from all online payment apps to eliminate impulse buys.

Step 3: Choose Your Attack Method (Debt Snowball vs. Debt Avalanche)

Now that you have some extra cash from your budget, it's time to decide how to attack your debts. There are two popular and proven methods.

The Debt Snowball Method (For Motivation) ❄️

• How it works: You continue to pay the minimum amount on all your debts. With all the extra money you've freed up, you attack the **debt with the smallest balance first**, regardless of the interest rate. Once that smallest debt is paid off, you take its payment amount and "snowball" it onto the next smallest debt.
• Why it works: It gives you quick psychological wins. Paying off that first small debt feels amazing and builds powerful momentum to keep you going. This is the method for you if you feel overwhelmed and need motivation.

The Debt Avalanche Method (For Saving Money) 🏔️

• How it works: You pay the minimum amount on all your debts. With all the extra money, you attack the **debt with the highest interest rate first**, regardless of the balance. Once that's cleared, you move to the debt with the next highest interest rate.
• Why it works: Mathematically, this method will save you the most money in interest payments over time. High-interest debt (like credit card debt) is a financial emergency. This is the method for you if you are disciplined and motivated by numbers.

The Verdict: Both methods work! The best plan is the one you will actually stick with. For most people, the motivation from the **Debt Snowball** is more effective.

Step 4: Increase Your Income (Accelerate the Process) 🚀

There's a limit to how much you can cut from your budget, but there is no limit to how much you can earn. To get out of debt faster, consider ways to increase your income, even temporarily.

• Ask for a raise or look for a better-paying job.
• Start a side hustle based on your skills (freelance writing, graphic design, online tutoring).
• Sell things around your house that you no longer need.

Commit to using 100% of this extra income to pay off your debt. This can shave months or even years off your debt-free journey.

Step 5: Life After Debt - Never Again

Once you make that final payment, your work isn't done. The goal is to stay debt-free forever.

1. Build Your Emergency Fund: This is your #1 priority. An emergency fund is your shield against future unexpected costs, ensuring you never have to borrow again. Use our guide to building an emergency fund to start.
2. Fix Your CIBIL Score: Clearing your debts will start to improve your CIBIL score over time. Continue to monitor it.
3. Start Investing: Now, take all that money you were sending to the banks and start paying yourself. Begin your investment journey to build a truly secure future.

This is how you turn a past mistake, like the ones mentioned in our guide on common financial mistakes, into a powerful lesson.

Conclusion: Your Journey to Financial Freedom

Getting out of debt is a marathon, not a sprint. It will test your discipline and your patience. But every small payment you make is a step towards freedom. The process will teach you invaluable lessons about budgeting, discipline, and the true meaning of financial control.

The feeling of making that last payment and knowing that your income is finally yours to keep is one of the most empowering experiences you can have. You can do this.

What is the first step you will take from this plan to start your debt-free journey? Share your commitment in the comments below!