How to Get Out of Debt in Pakistan: Practical Steps to Regain Financial Freedom

Debt has become a common reality for many Pakistanis due to rising inflation, job insecurity, and increasing living costs. Whether it’s a personal loan, credit card bill, or informal borrowing, being stuck in debt can be stressful. The good news? You can break free. This guide explains how to get out of debt in Pakistan using practical steps and smart financial habits that actually work.

Understanding Debt in Pakistan

Before finding a solution, it’s essential to understand how debt accumulates. According to the State Bank of Pakistan (SBP), consumer financing has grown rapidly, with more people using personal loans and credit cards for household expenses. The problem begins when repayments exceed income — leading to a cycle of borrowing.

1. Assess Your Current Financial Situation

Start by listing all your debts — bank loans, credit cards, family borrowings, or business debts. Write down the total amount, interest rate, and monthly payment for each. This will help you see where your money goes and identify high-interest debts that need attention first.

  • Tip: Use a simple Excel sheet or mobile app to track all debts in one place.

2. Create a Realistic Budget

A well-planned budget is the foundation of debt management. Calculate your total monthly income and categorize expenses (rent, food, transport, utilities). Set aside a fixed portion for debt repayment every month. Cutting unnecessary expenses can free up cash for faster repayments.

  • Limit eating out and reduce fuel costs by using public transport.
  • Cancel unused subscriptions or mobile data packages.
  • Shop smartly using discount apps like Savyour or Daraz deals.

3. Prioritize High-Interest Debts

Focus on paying off the most expensive debts first — usually credit cards or personal loans. This strategy, known as the debt avalanche method, saves you money in the long run. Alternatively, if small wins motivate you, try the debt snowball method — pay off the smallest balances first and build momentum.

4. Negotiate with Lenders

Many banks in Pakistan are open to restructuring or consolidating loans if you communicate honestly. Contact your lender to discuss lower interest rates, extended payment terms, or loan settlement options. Examples include HBL Debt Relief, MCB Easy Payment, and Meezan Bank restructuring programs.

Example:

Sana, a Karachi-based teacher, owed PKR 300,000 on her credit card. After contacting her bank, she negotiated a 12-month installment plan with reduced interest, making her debt manageable.

5. Increase Your Income Sources

Getting out of debt faster is easier when you earn more. Consider freelancing, part-time tutoring, or selling products online. Platforms like Fiverr, Upwork, and Daraz Seller Center allow Pakistanis to generate extra income from home.

  • Offer online tuition or translation services.
  • Start a small home-based food or clothing business.
  • Sell unused items on OLX or Facebook Marketplace.

6. Avoid Taking New Loans

One of the biggest mistakes debtors make is borrowing to pay old debts. Avoid payday loans, credit cards, or informal borrowing. Instead, focus on repayment and emergency savings. If you must borrow, do so only for essential needs and from transparent, regulated sources.

7. Build an Emergency Fund

Many Pakistanis fall into debt again due to emergencies. Create an emergency fund to cover 3–6 months of living expenses. You can start small — even PKR 5,000 per month in a savings account helps. This fund protects you from relying on loans when unexpected expenses arise.

8. Seek Financial Counseling

If debt feels overwhelming, professional help can make a difference. Non-profit organizations and financial advisors in Pakistan offer debt management counseling. Look for SECP-registered financial advisors or programs like Karandaaz Pakistan for guidance on managing money and improving credit health.

9. Adopt a Debt-Free Lifestyle

Once you’re out of debt, stay that way by changing your money habits. Use cash instead of credit cards, track expenses monthly, and invest wisely. Consider low-risk options like National Savings Schemes, money market funds, or Islamic savings accounts to grow your wealth gradually.

Example:

Imran from Lahore cleared his PKR 500,000 personal loan in two years by budgeting, taking freelance projects, and avoiding luxury purchases. He now invests in mutual funds and maintains a six-month emergency fund.

10. Stay Motivated and Consistent

Debt repayment takes time. Celebrate small milestones — every loan paid off is progress. Surround yourself with supportive friends and family, and track your financial growth monthly. Remember, financial freedom is not about earning more, it’s about managing what you already have.

Final Thoughts

Getting out of debt in Pakistan may seem difficult, but it’s entirely possible with planning, discipline, and the right mindset. Start by understanding your debt, create a repayment plan, increase income, and avoid unnecessary borrowing. Over time, you’ll gain control over your finances and build a stable, debt-free future.

How to Get Out of Debt in Pakistan - Practical Financial Tips and Debt Relief Strategies

Sources: State Bank of Pakistan, SECP Consumer Financing Report 2024, Karandaaz Pakistan