Debt relief is a plan, not a single trick
If you are juggling a credit card, a personal loan and a couple of small app or BNPL dues, the hardest part is not knowing which move to make first. This guide is a practical toolkit: seven strategies, the order to use them in, and a worked example that shows how much each one actually saves.
If you are already missing payments or borrowing to repay, start with our step-by-step guide on getting out of a debt trap in India. If you want to stay out of debt in the first place, read 12 ways to stay out of a debt trap.
1. Make a complete debt list
Write down every debt you owe: cards, personal loans, consumer-durable EMIs, BNPL plans, loan-app loans and money owed to family. For each, note four things.
| Debt | Balance | Rate or fee | Minimum monthly payment |
|---|---|---|---|
| Credit card | ₹80,000 | 3% a month | ₹4,000 |
| Personal loan | ₹1,20,000 | 16% a year | ₹4,000 |
| Small app/BNPL balance | ₹20,000 | 2% a month | ₹1,000 |
An illustrative debt list, used for the worked example throughout this guide. Not a real customer.
Pull your free credit reports too. You are entitled to one free full report from each bureau (TransUnion CIBIL, Experian, Equifax and CRIF High Mark) every calendar year, and they often show an old card or loan you had forgotten.
2. Set your monthly repayment number
Track one month of spending, then split it into essentials (rent, food, school fees, transport, insurance), the minimums on your debts, and everything else. Whatever you can move from “everything else” to debt is your repayment budget. Make it a number you can hit every single month: a plan you abandon in month three saves nothing.
In our example, the borrower takes home ₹65,000 and commits ₹15,000 a month to debt: ₹9,000 of minimums plus ₹6,000 extra.
3. Stop the debt from growing
- Take the credit card out of your phone wallet and saved payment details.
- Do not take a new loan-app loan to pay an old one. That is how a ₹20,000 problem becomes a ₹1 lakh problem; see how payday rollovers compound.
- Pause BNPL at checkout until your list is clear.
- Set every EMI to auto-debit on the day after salary credit, so nothing is missed by accident.
4. Choose a payoff order: avalanche or snowball
Pay the minimum on every debt, then put all the extra money on one target. Two methods decide which target:
Avalanche
Target the highest interest rate first. It saves the most money, because the costliest balance shrinks fastest. Best if you are disciplined and motivated by numbers.
Snowball
Target the smallest balance first. You close an account quickly and feel the progress, which helps many people stick to the plan. It usually costs a little more interest.
In our example, with ₹15,000 a month, both methods clear everything in 18 months. Avalanche pays about ₹36,400 in interest; snowball about ₹38,100 but clears the small balance in month 3. The difference is real but modest. The bigger saving comes from strategy 5.
5. Cut the interest rate
Paying in the right order helps, but the interest rate itself decides most of what you pay. There are three common ways to lower it:
A debt consolidation loan
One personal loan pays off several costlier debts, leaving one EMI, one due date and one fixed end date. It works when the new loan’s APR, including the processing fee, is clearly below the blended cost of what it replaces. More in what debt consolidation is and when to do it.
A credit card balance transfer
Moving a balance to another card at a lower promotional rate can help if you can clear it within the offer period. Read the fees and what the rate becomes afterwards.
Converting the card balance to EMI
Most banks will convert a card balance into fixed EMIs at a lower rate than revolving interest. It is quick, but compare the rate and fee with a personal loan first.
Interest paid to clear ₹2.2 lakh of debt at ₹15,000 a month
Illustrative. Debts as in the table above; ₹15,000 a month in every scenario, interest charged monthly. The consolidation bar assumes one loan of ₹2.2 lakh at an illustrative 16% a year and excludes its processing fee; a fee of 3% plus GST would add about ₹7,800, which still leaves it cheaper. Your own numbers will differ.
6. Talk to your lenders before you miss a payment
Lenders would much rather agree a plan than chase a default. If your income has dropped or an emergency has hit, call or write to them early and ask about:
- A revised repayment schedule or a longer tenure to lower the EMI.
- A waiver of penal charges if you clear the overdue amount.
- Restructuring where your situation genuinely qualifies; see our guide to debt restructuring.
- Written confirmation of anything agreed, and a no-dues certificate when an account is closed.
Be wary of settling for less than you owe unless you truly cannot pay: a “settled” remark stays on your credit report for years. And remember that regulated lenders must follow fair recovery practices. If you face harassment, complain to the lender’s grievance officer and, if unresolved, the RBI Ombudsman.
7. Free up one-off cash, and protect it
A lump sum aimed at the costliest debt shortens the whole plan. Common sources: an annual bonus, a tax refund, selling something you no longer use, or an interest-free salary advance from your employer. Once the expensive debts are gone, keep a small buffer, even one month of expenses, so the next surprise bill does not go straight back on a card. If you are deciding whether to get outside help, compare doing it yourself versus a debt agency.
Figures from the illustrative example above.
Where Omozing fits
Omozing, the digital lending brand of RBI-registered NBFC Aparampaar Finance, offers salaried borrowers unsecured personal loans from ₹40,000 take-home and a credit score from 600, with rates starting from 11% a year and the exact APR shown in the Key Fact Statement before you sign. A credit officer reads your full report rather than rejecting on a number.
If your debt is mostly short-term loan-app loans, SmartSwitch is built for exactly that: it consolidates several app loans into one Omozing loan and one EMI. The money goes to your own account and you close each app loan within about seven days, sharing the NOCs. As an illustration, ₹75,000 spread across three apps can cost around ₹30,000 a month in rollovers, against one EMI of about ₹7,750.
Juggling several app loans?
See how much one EMI could save you each month with SmartSwitch.
Frequently asked questions
Which debt should I pay off first?
Pay the minimum on everything, then put extra money on the debt with the highest interest rate (the avalanche method) to save the most. If you need a quick win to stay motivated, clear the smallest balance first (the snowball method).
Is debt consolidation a good idea?
It is a good idea when the new loan’s total cost, including processing fees, is clearly lower than what you are paying now, and when you stop using the cards or apps you pay off. Otherwise you can end up with the new loan and the old debts.
Will debt relief strategies hurt my credit score?
Paying down balances and closing loans on time generally helps your score. A new consolidation loan adds one enquiry, which has a small, short-lived effect. Settling a debt for less than you owe, by contrast, leaves a negative remark for years.
Can I negotiate with my bank to reduce my EMI?
You can ask. Banks and NBFCs may extend the tenure, revise the schedule or waive penal charges, especially if you approach them before missing payments. Get anything agreed in writing.
How long does it take to become debt-free?
It depends on what you owe, the rates and how much you can pay each month. In our illustrative example, ₹2.2 lakh of mixed debt took 17 to 18 months at ₹15,000 a month.
Should I use savings to pay off debt?
Using spare savings to clear high-interest debt usually makes sense, since card and app debt costs far more than savings earn. Keep a small emergency buffer, though, so you do not have to borrow again at the next surprise.
Omozing is the digital lending brand of Aparampaar Finance Private Limited, an RBI-registered non-deposit-taking NBFC. Loans are subject to credit assessment. See our regulatory disclosures and grievance redressal process.