There are options like loan against property, stocks and life insurance policies. Mounting debt has become a problem for many. It just takes a few credit card bills, a personal loan, an auto loan and a home loan to make things bad. Ideally, your total installment-to-income ratio should not be more that 40-50 per cent, but many exceed this limit. Result: They keep on borrowing to retire earlier loans - a classic debt trap.

Target most expensive loans

Start by targeting the most expensive loan. In case of credit card loans, one can end up paying as much as 40-50 per cent interest every year. Then come personal loans. Existing rates for personal loans are 14-30 per cent. The interest rates for credit card and personal loans are high as there is no collateral. Car loans are also expensive but have the cushion of a collateral. One can sell the car if one is desperate for cash. Also, taking a car loan makes sense for businessmen as it gives them the chance to claim depreciation

Home loans could be the biggest ones

Home loans, which are generally the biggest in terms of the amount, need not be paid off as fast as other loans because they provide tax benefits -- interest payments up to Rs 1.5 lakh are deducted from taxable income while calculating the tax liability. Also, principal payment of up to Rs 1 lakh is eligible for tax benefits under Section 80C.

Consider personal loans

One can even take a bigger personal loan and pay off credit card and personal loans. In this manner, one can consolidate two high-interest loans into one. Then, there are cheaper options like taking a loan against property. Most big banks allow you to borrow against property. The amount, in this case, is much higher and can allow you retire credit card, personal and auto loans at one go.

Gold could be kept as collateral

And then, there is the yellow metal. According to Dedhia, if one urgently needs money, one can keep the gold as a collateral with a bank to raise cash. But in India, most people have jewellery rather than gold bars. This reduces the value of the gold by 10-15 per cent.