From Running Away in Debt Despair to Saving ₹11 Lakhs: Mandar Kadam’s Journey Back to Financial Stability
March 19, 2026
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India is borrowing like never before. Personal loan disbursals crossed 6.4 crore in volume in H1 FY25-26 whereas millions of Indians rely on credit cards to manage daily expenses. For many, the convenience of easy credit is quickly turning into a repetitive cycle of one EMI payment after another.
If this sounds familiar, you are not alone — and more importantly, you are not stuck. This guide lays out a clear, honest exit plan to help you break free from the personal loan trap for good.
A personal loan trap is a situation where your total EMI obligations have grown beyond what you can realistically repay from your monthly income. The cycle works like this: you take a loan, struggle to repay it, take another loan to cover the gap, and the interest keeps compounding on every outstanding balance.
What makes it a trap is that paying minimum loans and taking more credit actually make things worse. The debt grows faster than you can pay it down. Each missed payment adds penalties. Each new loan adds to the total interest burden.
Age: 52 | City: Mumbai | Total Debt: ₹10,75,772
Abdul Salim’s story started with a single loan. A workplace incident forced him to borrow money to cover an immediate financial loss. Shortly after, Abdul lost his job. And in the same period, he suffered a serious accident that required critical eye surgery and a leg operation. The medical bills wiped out whatever savings he had left. The EMIs on his loan, however, did not stop.
After recovering physically, Abdul started working as a food delivery partner, the only job he could manage due to his injuries. However, his earnings barely covered household expenses, let alone the mounting loan repayments and penalties for missed payments.
The Numbers That Tell the Story:
By coming in contact with SettleMyLoan, Abdul got professional support for negotiation of up to 83% reduction in settled amount.
Particulars | Amount (In Rs.) |
Total Outstanding Debt | 10,75,772 |
Settled | 1,86,541 |
Savings | 8,89,231 |
High-interest debt and multiple obligations are the most common causes of debt traps in India. Here’s how you can identify whether you are also stuck in a personal loan trap:
Financial experts recommend keeping your total EMI obligations under 40% of your net monthly income. If your EMIs regularly consume more than this, you are in the danger zone. Even a small income disruption — a medical bill, a job change — can push you into default.
This is the single clearest sign you are in a debt trap. The moment you borrow money specifically to repay existing debt, the total amount owed never decreases — it increases, because each new loan comes with its own interest and fees.
Paying the minimum amount due on your credit card keeps the account active but lets the lender charge 30–40% annual interest on the remaining balance. Minimum payments are designed to keep you in debt longer, not to help you get out.
If you have active loans across three or more lenders, especially instant loan apps, this is a serious warning sign. These apps often charge the highest effective interest rates in the market, wrapped in processing fees and penalties that are easy to miss.
If the days before your salary credit are spent in anxiety about whether your EMI will bounce or whether you can cover all your dues, your debt load has crossed a healthy threshold.
A declining CIBIL score signals that your repayment behaviour is deteriorating. Missed EMIs, high credit utilization, and multiple loan inquiries lower your score, making refinancing and bank support harder and more expensive.
If all your disposable income goes towards debt servicing and you have zero emergency fund, a single unexpected expense can push you into default.
Drowning in personal loan EMIs? Here’s your step-by-step exit plan:
You cannot fix what you have not mapped. Sit down and prepare a complete detail of every loan you owe. For each one, note down:
Total it all up. This number is your starting point.
This is non-negotiable. The exit plan only works if you stop adding fuel to the fire. Specifically, avoid:
List all your debts by interest rate. Throw every spare rupee at the highest-interest debt first, while paying the minimum on everything else. Once the costliest debt is cleared, redirect those funds to the next one. This ‘avalanche method’ minimises the total interest you pay and gets you out faster.
If you have three or four different loans, a debt consolidation loan can combine them into a single EMI, ideally at a lower interest rate. This simplifies your repayment, reduces the chance of missing a due date, and often lowers the total monthly outgo. But it still is another loan.
Many borrowers do not realise they can approach their bank directly and ask for relief. Options include:
Banks and NBFCs are often willing to negotiate if you approach them before you default. Take a professional’s assistance for negotiations.
When your debt has grown beyond what restructuring can fix, personal loan settlement may be the most practical solution.
It is important to understand the process clearly:
However, a ‘Settled’ status is far better than an ongoing default or write-off. And with Settle My Loan’s OTS with Credit Clearance option, your credit report can be updated to show ‘NIL’ balance — minimising the long-term impact on your score.
Beyond settlement, SML provides full anti-harassment protection, taking over all communication with creditors, and expert legal support for any notices or proceedings. Learn more about your options on the Settle My Loan foreclosure page as well.
Yes. Loan settlement is a completely legal and widely recognised process in India. Banks and NBFCs regularly enter into settlement agreements with borrowers who can demonstrate genuine financial hardship. A formal settlement letter issued by the bank is your legal proof of closure.
The timeline typically ranges from 3 to 9 months, depending on the lender and the complexity of your debt profile. Settle My Loan also offers a 45-Day Settlement Challenge for clients who qualify for a fast-track resolution.
Yes. Banks can restructure your loan by extending the tenure (which lowers the monthly EMI), offer a temporary moratorium period, or process a balance transfer to a lower-interest product. The key is to approach your bank proactively before you default — lenders are more flexible with borrowers who communicate early.
