Drop your debt. Here's how

My only savings is in the provident fund.

The credit card dues depress me, since it amounts to Rs 3,00,000.

My only option is to sell the house which would fetch me Rs 5,00,000.

- Soumik Kalita

Take charge of your credit card spends. If you are a compulsive spender, return all cards except one. Begin to repay the credit card outstanding -- do not pay only the minimum amount due. 

Repay in disciplined manner and give yourself a time frame to repay the dues. Make sure you don't incur fresh credit dues. 

Do not panic and sell the house. You will feel more depressed if you do that.

In a year's time, you should be able to take charge of your finances. You can begin to save and invest when you reduce your debt and your salary increases. 

In matters of money, a little done with discipline can mean a lot. 

Instead of worrying about the loan and getting depressed, begin to repay it and you will feel better.

You can then reduce the credit limit on that card so you do not find yourself in a debt trap again.

Read Get out of debt, NOW! to figure out how to prioritise your loans.

I am in a financial mess. These are my details:

Monthly net take home = Rs 38,000

Personal loan = Rs 7000 / month till 2007

Rent = Rs 7,000 / month

Credit card due = Rs 40,000

My aim is to buy a car and a house within the next three years.

- Shom

There is no financial mess if you take charge from now on. 

Try and keep your income divided sensibly between your expenses, loan repayments and savings. Pay off the credit card and the personal loan, as these have higher interest rates.

After you free the money that went into clearing these debts, begin to save and invest as if you are still paying these loans. 

Make sure you have some saving and investments, before you can take on fresh loans for the house and car. If you take loans that are well within your earning and spending patterns, you will be able to manage them. 

Remember that you will not be able to sell the house in bits to meet monthly expenses.  Repay the loans first, then save and invest. Fresh loans can come after that.

• Tips on how to get out of debt

A few months ago, I took a home loan of Rs 14 lakh (Rs 1.4 million). It is an 8 year loan with a rate of interest of 7.5%. There is no pre-payment penalty if I pay 10% of the amount.

Since I have Rs 1,40,000 to spare, is it  advisable to repay 10% of the loan amount or is it preferable to invest the money?

I am confident I can invest the money in an instrument which can give me yearly returns of at least 15%.

If the return on your investment is lower than the interest rate you are paying on the loan, you should pre-pay the loan.

Since you have not disclosed what this magical "at least 15%" instrument is, I must caution you against taking any undue risk with your money.

Uma Shashikant is a well-known Knowledge Management Consultant.