How to build a debt repayment plan when you cannot pay all your EMIs

A workable debt plan in India starts with four numbers for every debt: the balance, the interest rate, the monthly EMI or minimum payment, and the days overdue. Add whether it is secured. Then work out how much you can really pay each month after rent, food, school fees, medicines and utilities. If that amount covers all EMIs, cut costs and keep paying. If it covers most of them, ask the lenders whose EMIs you cannot meet for restructuring. If it covers far less, protect your secured loans first and plan settlements for the unsecured debts you cannot repay in full. Put every request in writing, and never pay anyone except the lender.

This is the pillar guide for the worked examples and checklists. It links to every guide in the section. Use the debt distress checklist alongside it.

Step 1: list every debt

Use one row per debt. Include informal loans from relatives, chit funds and moneylenders, because they compete for the same money.

All figures are illustrative. Get the real balances from statements or your credit report. Each of the four credit bureaus gives you one free full report a year.

Check the lender is regulated. For app loans, the lender behind the app should be a bank or an RBI-registered NBFC. The app should name it. Unregulated lenders do not follow RBI rules, and their "loans" may not even be legally enforceable. Report them on the RBI's Sachet portal and to the police.

Step 2: work out what you can actually pay

All the EMIs and minimums in Step 1 add up to ₹45,500. The gap is ₹13,000 a month.

Step 3: rank the debts

Generally, pay in this order:

1. Loans secured on your home, then the vehicle you need to earn, then gold loans if the gold matters to you. Default here costs you the asset.
2. Anything backed by a cheque you have issued, since a bounce can become a criminal case under Section 138. See cheque bounce.
3. Unsecured bank and NBFC debts, with the highest rate first if you can pay something on each.
4. Informal family debts, by agreement. Be honest with relatives about timing.

The reasoning, and exceptions, are in which debts to pay first.

In the example, the home loan (₹19,500) and two-wheeler (₹3,200) take ₹22,700. That leaves ₹9,800 for the unsecured debts, which need ₹22,800 a month.

Step 4: choose a route for each unsecured debt

Suppose the personal loan is restructured to 4 years at 15%. The EMI falls to about ₹6,123. The card converted to a 24-month plan at 18% needs about ₹5,492. Together that is ₹11,615, still above the ₹9,800 available. The app loan would then need a settlement or a lump sum from savings. Use the repayment plan calculator for each.

Next, read the guides on settlement arithmetic, consolidation, hardship requests, negotiating a settlement letter and settle or keep paying.

Step 5: write to each lender

For each lender:

• write to the collections or grievance team, by email or a letter with acknowledgment;
• state the account number, what has changed (job loss, illness, business slowdown), and what you can pay;
• attach evidence;
• propose a specific plan;
• ask for a written reply.

Keep a log of every call, letter and promise. If a lender ignores you for 30 days or rejects you unfairly, you can complain to the RBI Ombudsman. See complaints.

Step 6: review monthly

Track what you paid and what the lender recorded. Check your credit report after each restructuring or settlement. Once a debt is cleared, move its payment to the next one on the list.

Common mistakes in repayment plans

• Making minimum payments on every card and never cutting the balance.
• Borrowing from a new app to pay an old one.
• Promising lenders amounts you cannot pay, then breaking the promise.
• Leaving out irregular costs like school fees, festivals and insurance premiums.
• Settling one debt with money needed for the home loan EMI.

When to consult a professional

If your debts exceed what you can repay over five years, or legal notices have started, speak to a lawyer or a legal services authority. A financial literacy centre run by banks can help with budgeting at no charge. See free legal aid and credit counselling.

Frequently asked questions

How do I know whether my debt is unmanageable?

If your essential costs plus all EMIs exceed your income month after month, and you have no savings left, the debt is unmanageable on its current terms. That is when to approach lenders, before accounts become NPAs.

Should I use my emergency fund or PF to clear debts?

Using savings to clear very high-rate debt can make sense, but keep a buffer for essentials. Withdrawing provident fund or breaking insurance policies has its own costs and tax effects, so check them first.

Will talking to the lender make it worse?

Usually not. Lenders prefer a borrower who communicates. Put it in writing so there is a record.

Can I stop paying one debt to save for a settlement?

Some borrowers do, but the account will become overdue, attract charges and be reported. Do it only as a deliberate choice, and never on a debt secured by your home or backed by your cheque.

Sources

• Reserve Bank of India: fair practices, recovery and stressed asset rules
• RBI Sachet portal: check and report unregulated lenders
• TransUnion CIBIL: free annual credit report
• National Legal Services Authority: free legal aid