How 24-year-old Delhi Based Harinath Mehra became debt-free in 4 months

Delhi-based Harinath Mehra is worried these days about his friends, more specifically, their spending habits. Armed with multiple credit cards, his friends often go on spending sprees. What worries him most is their tendency to spend more than they can afford, which has become a habit now. "For instance, sometimes they end up ordering a full meal when all they want is a burger," says the 24-year-old.

It's not as if Mehra had such wisdom all along; he learned it the hard way. Not so long ago, he had stretched his credit cards to their limits, seemingly unconcerned about the prospect of repayment. Little did he anticipate that a series of setbacks, including job loss, persistent health problems, and looming medical expenses, would conspire against him. Mehra found himself in a dire predicament, as his carefully laid plans for repaying his loans were suddenly derailed by these crises.

Mehra lost his job in 2020 during Covid-19. He quickly found a new job, but it came with a 50 per cent pay cut. The salary was insufficient to cover his mounting credit card debt. It was last year in October 2022 that his condition worsened and the constant lender calls started taking a toll. It was then that Mehra decided to take help and found FREED, a Gurgaon-based debt management solutions provider, while searching for legal advice on creditor harassment. The debt relief platform helped Harinath to regain his financial freedom. 

"I went through a lot of stress and anxiety when I couldn't pay my credit card balance. It was not easy to deal with recovery agents, as it caused me a lot of mental harassment. There were so many harassment calls in a day from recovery agents that it started taking a toll on my mental health," recounts Mehra. 

Mehra's debt from credit cards included various lenders ranging from Rs, 51,296 to 1.27 lakh against a current income of Rs 37000. Here is how he got out of the debt trap:

Debt Resolution

FREED started by understanding Mehra's need for debt relief. He showed clear intent and resolve to come out of debt. He shared his job loss story with FREED, which had put him under immense financial stress. The counsellors evaluated his debt and current financial situation. This required a detailed analysis with careful notes on his current income and obligations, including any repayments that he needed to make towards the education loan.

FREED created a tailored Debt Relief Plan that was sustainable and affordable, counselling and handholding him all along the journey.  FREED helped him set aside funds month on month towards his settlements, instilling financial discipline. As funds built up, FREED negotiated with the lenders on his behalf to bring favourable settlements, starting with the biggest debt first. Along with a host of benefits that came with the Program, FREED offered protection from creditor harassment to ease the collection pressure.

It is noteworthy that it was young Mehra's resolve to become debt-free that played a critical role in the success of his journey. He was able to save aside and come up with funds to help the team negotiate favorable settlements.  "I became debt-free in 3-4 months and the settlement helped in savings of around 57%. It has helped me to regain control over my finances,” said Mehra
 

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Be Vigilant: Mehra's isn't an isolated case. Millennials and GenZ, enticed by the ready availability of credit cards, Buy Now, Pay Later (BNPL) schemes, and other loan options on various lending apps, can easily fall into a debt trap by overspending using their credit options, then paying only the minimum due, or defaulting on their debt obligations, and then getting caught in the rigmarole of debt recovery.

In fact, a July report by credit bureau TransUnion CIBIL reveals that 40 per cent of the retail loan demand is driven by younger customers, aged between 18 and 30 years. If the youth don't become wise to the perils of overspending, this could become a serious challenge going forward, given the demographic of the country where over half the population (52 per cent) is below the age of 30, per the National Family Health Survey-5 (2019-21), say experts.

Consider this: According to data shared in Parliament, the amount outstanding on credit cards rose 28 per cent to Rs 2.10 lakh crore in March 2023 from Rs 1.64 lakh crore in March 2022. During the same period, credit card defaults rose to Rs 4,072 crore or 1.94 per cent from Rs 3,122 crore in March 2022 or 1.90 per cent, which implies that defaults increased at the same rate as loans being disbursed.

Taking a leaf out of Mehra's life, it's crucial to exercise prudence in managing your finances. Being a prudent borrower and ensuring timely repayment of debts is a wise and responsible approach.