Being in debt is discomforting and panic-inducing for those who are dealing with it. Sometimes one is left with no choice but to aid their finances by borrowing from lenders. Till the time it is manageable, it doesn’t pinch, but often one thing leads to another and one finds themselves under the vicious cycle of borrowing money which keeps on accumulating and debt repayment becomes a continuous exercise with no room to save or spend on personal expenses. Getting a Personal Loan seems convenient but this can go out of hand if not managed prudently.
Understanding the Debt Trap
A debt trap is a vicious exercise of taking new loans to pay off the existing loans and repeating the cycle over and over again. Here are some classic signs of a debt trap-
- Increasing Debt Balance: Even if you are making all the payments timely, your debt doesn’t seem to end. This can happen due to higher interest rates charged by the lending body.
2. Frequent Loan Borrowing: The habit of paying off the loans by taking a new loan turns into a cycle of debt trap. - Minimal Savings: There are practically no savings left due to ongoing loans.
4. Missed Payments: When debt repayment is not done on time, that snowballs into compounded charges and late penalties.
One downside of Personal Loans is that there is a high interest levied on them, which turns them into an expensive proposition. The borrower often finds himself unable to repay the amount in the absence of funds.
Let’s look at how you can get out of debt traps, in case you struggling with the repayment of personal loans.