How to get out of a debt trap

Recognise the trap A debt trap is when new borrowing goes to service old debt — paying one card with another, or taking a loan to cover EMIs. Interest keeps compounding faster than you repay. Breaking out needs a plan, not just willpower.

Step 1 — Stop adding to it Freeze new borrowing. Put the cards away, pause EMI-based purchases, and switch to spending only what you have. You cannot dig out while still digging.

Step 2 — List every debt in one place Write down each loan and card: outstanding balance, interest rate, and minimum payment. Seeing the full picture is uncomfortable but essential — vague dread is worse than a clear number.

Step 3 — Attack high-interest debt first Always pay every minimum on time to protect your credit score, then throw every spare rupee at the highest-interest debt (usually credit cards at 30–40% a year). Clearing these first saves the most money — the avalanche method.

Step 4 — Consider consolidation If you have several high-cost debts, a single lower-interest personal loan, a balance transfer, or a top-up on a secured loan can cut the rate and simplify payments into one EMI. Use this to save interest, not to free up room to borrow again.

Step 5 — Build a tiny buffer Even ₹10,000–20,000 set aside stops the next small emergency from pushing you back onto a card. Build it alongside repayment, not after.

Step 6 — Prepay as cash frees up As you clear balances, redirect the freed-up EMIs onto the next debt (the snowball effect). Model how extra payments shrink your tenure and total interest — watching the payoff date move closer is the motivation that keeps the plan alive.