By BillCut
Last updated: 6 November 2026
A debt free plan for salaried borrowers starts with one idea: know exactly what you owe, pay every minimum on time, and send every spare rupee to the most costly debt first. This guide gives a step by step plan you can follow with a monthly salary. It lists the options, including loan consolidation, without promising any outcome.
Step 1: What do you actually owe?
Write every debt down in one table: credit card balances, personal loans, app loans, consumer durable EMIs and any money borrowed from people you know. For each, note the balance, the interest rate, the monthly payment and the due date. You can get a view of your loans and cards from your credit report. CIBIL lets you see your report, and it has a way to raise a dispute if something is wrong.
Step 2: How much can you really pay each month?
Take your monthly pay after deductions. Subtract rent, food, bills and the minimum payments on all debts. What is left is the amount you can use to clear debt faster. If it is zero or negative, jump to Step 4, because the plan then needs a change in how your debts are structured.
Step 3: Which debt should get the extra money?
Pay every minimum on time, then put extra money on one debt. Two common ways:
- Highest interest rate first. This usually costs the least in total interest.
- Smallest balance first. This clears debts sooner and some people find it easier to stay motivated.
Our post on breaking several EMIs and the detailed note on loan payoff order on this site go deeper into the choice.
Illustrative example: where does the interest go?
This example is illustrative, with round made up numbers. It is not an offer from any lender.
| Debt (illustrative) | Balance | Yearly rate | Interest in one month, approx. |
|---|---|---|---|
| Credit card | Rs 80,000 | 36 percent | Rs 2,400 |
| Personal loan | Rs 2,00,000 | 15 percent | Rs 2,500 |
| Total | Rs 2,80,000 | Rs 4,900 |
The card is less than half the size of the loan, yet it costs almost the same in monthly interest. That is why many borrowers look at the card first. Any extra money you put on the card lowers a cost that is running at a high rate.
Step 4: Which options can lower the cost?
- Ask your lender. Some lenders will talk about a lower rate or a longer tenure. They may say no.
- Move a card balance to a lower cost option, such as a balance transfer, a card EMI or a personal loan. Compare the full cost, including fees and charges.
- Consolidate several debts into one loan with one EMI. This can make payments simpler. It does not cancel the debt, and the total cost depends on the rate, fees and tenure you get.
- Use extra income, such as a bonus, to part pay a high cost debt.
See our posts on refinancing apps and card EMIs versus personal loans before you pick one.
Step 5: What should you check before you close or consolidate?
Check the loan agreement for prepayment or foreclosure charges. The RBI has issued directions on pre-payment charges on loans. They say there are no pre-payment charges on floating rate loans to individuals for non-business purposes, for loans sanctioned or renewed on or after 1 January 2026. Fixed rate loans follow the lender’s own policy, and any charge must be stated in the sanction letter, loan agreement and key facts statement. Read your own documents to see what applies to you.
Also look at processing fees on any new loan, and whether a longer tenure lowers your EMI but raises the total interest.
Step 6: How do you stay out of debt after?
- Pay the full card bill each month, not the minimum.
- Keep a small emergency fund so a surprise bill does not go on a card.
- Keep total EMIs at a level your salary can carry. Our guide on fixing debt overload explains warning signs.
- Check your credit report once in a while for errors.
If a lender or agent treats you badly, you can raise a complaint through the National Consumer Helpline or contact the lender’s grievance team and the RBI at rbi.org.in.
Check your options with BillCut
How BillCut can help
BillCut is a balance transfer and debt reduction platform. It works with lending partners to help eligible borrowers move high interest dues, such as credit card balances and personal loan EMIs, into one structured EMI. BillCut earns from helping borrowers refinance, so it has an interest in this option. Approval and terms depend on the partner lender.
Frequently asked questions
What is the first step in a debt free plan?
List every debt with its balance, rate, monthly payment and due date. You cannot plan a payoff without the full picture.
Should I clear my credit card or my personal loan first?
Many people clear the highest interest debt first because it usually costs the least overall. The right choice depends on your numbers and your comfort.
Does loan consolidation reduce my debt?
No. It combines several debts into one. The total cost depends on the rate, fees and tenure, and approval depends on the lender.
Will consolidation hurt my credit score?
It can have different effects depending on how it is done and how you repay after. Missed payments harm a score. Check your credit report for the details.
Do personal loans have prepayment charges?
It depends on the loan and the lender. RBI directions say floating rate loans to individuals for non-business purposes carry none, for loans sanctioned or renewed on or after 1 January 2026. Check your agreement.
How long will it take to become debt free?
It depends on what you owe, the rates and how much extra you can pay each month. No honest plan can promise a date.
What if I cannot pay even the minimums?
Talk to your lenders early about options. You can also seek help from a credit counsellor and look at restructuring or consolidation. Do not take a new loan only to pay old EMIs without checking its cost.
Disclaimer: This page is for general information only. It is not financial, tax or legal advice. All numbers in the example are illustrative and are not offers. Check your loan agreements and speak to a qualified professional before you decide.
Are you still struggling with higher rate of interests on your credit card debts? Cut your bills with BillCut Today!