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WHAT ARE THE SIGNS THAT YOU ARE GETTING INTO DEBT TRAP?

Nowadays loans have become an important financial credit on which more than half of the population depends. Availing a loan can help you to get various things such as updated gadget or any electrical appliance, willingness to avail some luxuries like financing the most awaited trip or fulfilling some urgent financial requirement. The easy availability and minimum documentation make loans more affordable to the common people; therefore, they often go for loans as per their requirements.

Debt traps are an intense issue these days and mostly delayed to understand it completely. Usually, most of the borrowers are unaware to realize that they are getting further into this trap. Hence, to stay financially fit, one most know about the signs that you are getting into a debt trap. A debt trap can be more dangerous if goes unnoticed and a person goes for a new personal loan or LAP to repay the existing loan. Here we have listed few signs which indicate a debt trap around you.

Availing loan for regular expenses: Many people take loans to meet their daily expenses such as paying the credit card bills, utility bills or to enjoy the luxuries of life. Sometimes, people even go for "Personal Loan" to fulfill the requirements. But it is very risky and can lead to a financial burden. Borrowing money is an easy way out for a short term but in long term paying a high interest rate on it can be a tough choice. So, borrowing money for regular expenses is a clear indication that you are falling into a debt trap.

Taking a new loan to repay existing one: Sometimes, a person borrow more than its repayment capacity, and it gets hard for him/her to pay it back. In case, borrowers start defaulting on installments and need to pay the penalty charges. If you are in the same situation, always borrow wisely and according to your repayment limits and do not opt for borrowing again to repay the existing debts. Use an EMI calculator before you "Apply For Loan" to avoid a debt trap.

Do not exceed the EMI from monthly income: Low interest rates and low EMIs sound very tempting and you may end up taking a loan but try to think twice to fall prey on these marketing strategies as it can lead you to a financial burden. If your EMI exceeds 50% of your monthly income, then it is a clear threat for your financial goals. It can ruin your monthly budget and reduces the chances of getting loan in long run.

Missing payments and EMIs: Sometimes, cash crunch may force you to skip some of your credit card bill payments and utility bills. This is acceptable once or a twice in the year but committing the same mistake again and again will charge you the penalties and late payment charges. These extra payments can affect your monthly budget which can again end up taking another loan. It indicates that you are not managing your finances well and it’s high time to start working on it. Hence, try to be timely with all your bills and EMIs.

At the end, these are some of the common signs which are the clear indication of getting into a debt trap. To eradicate such issue, always borrow according to your repayment capability and avail a loan only if you are left with this only option.

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