FEW INDICATIONS THAT YOU ARE FALLING INTO DEBT TRAP

Nowadays loans are one of the important financial tools of which more than half of the population depends. They are used to fulfill any kind of financial requirement such to avail some luxuries, to purchase an updated gadget or to finance the most awaited vacations. The easy availability and attractive features of loan attract most of the audiences and they often take it as per their requirements. Generally, the borrowers don’t realize the intense issue behind delaying the repayments and unaware of getting further into this snare. Therefore, to be monetarily fit one ought to know about few indications that you are falling into debt trap.

Factors which indicate that you are getting into Debt Trap

Taking a loan for regular expenses: Few people secure loans when they are short of cash and start using credit cards and sometimes opt for a personal loan to fulfill their needs. This way of borrowing can help you at a point but paying the interest for long term will become tough and you need to repay much more than the borrowed amount.

Applying new loan to take over the existing loan: It is always advisable to be aware of your repayment capacity before you "Apply For Loan". Some individuals borrow more than their capacity and are unable to repay it back, therefore, start defaulting on the monthly installments leading to penalty charges. In case, if you continue this situation, you have no other choice to borrow money again to repay the outstanding dues. It is also another indication that you are falling into debt trap. Always borrow smartly and according to your needs and repayment capability.

Missing bills and EMIs: Some of uncertainties may let you to skip some of your payments which are acceptable for once but continuing this will charge you penalties and late payment charges. In a long run, it may affect your monthly budget which can end up in borrowing other loan which indicates that you are unable to manage finances well and here start the cycle of debt if the situation remains the same.

Increasing monthly installments 50% of your monthly income: In recent times, people end up taking loan due to attractive features which sounds very tempting such as offers, discounts, lower EMIs. These features fall into marketing strategies and if you fall prey to such offerings without knowing the consequences can lead to a debt trap. If you have multiple loans and installments exceed 50% of your monthly income then it can be threat to your long term financial goals and can lead you to a debt trap. The FOIR of 50% reduces the chances of getting approved for another loan in times of emergency.

The above mentioned factors are the common indications that you are getting into a debt trap. To avoid such circumstances, it is always advisable to borrow as per your repayment capability and take a loan only if you think it is the only choice you have at that time.