With the ever-growing digital space, borrowings have become much easier. It’s quite important to note that an incessant need for cash can push you towards an irrecoverable dent. You shouldn’t allow advertising gimmicks to lure you into taking on borrowings.
You may just be caught up in a debt trap because they go by what’s being sold in the market. Fintech companies run bad advertising to attract more & more customers. We see how more and more people are taking multiple loans as it’s much easier to do so.
According to a study, 23% salaried take personal loans to repay their EMIs, and 14% borrowed to pay off their existing loans. 60 days is the average frequency of repeat loans. Also, approximately 45% of personal loans were disbursed in 2019 & only 13% to those who were 25 or below. The number of personal loans taken has been growing at a 25% compounded annual growth rate (CAGR). Imagine! So, if you don’t carefully take a loan, it can backfire & make your life hard!
So let’s see a few constructive steps to reduce the burden of a loan trap:
1. No Further Loans should have Opted
Do not consider another loan to pay off the existing ones. This gradually builds up your debt trap. Every repayment must be done out of your earned income. Ensure that your family knows about how much you earn & what all are the expenses are hovering, so that money matters are intelligently dealt.
2. Impose a Credit Limit
Of course, everyone wishes to live a king sized life. It’s not easy to live within means. To limit your spending & adopting a lifestyle according to earnings with sacrifices & staying away from debts requires next level determination. This can also lead to several psychological disorders which can hamper your life. So take appropriate steps before it’s too late.
3. Increasing Trend
The upward trend of digitization has been transforming the way the loan market works. It’s all possible to do online, application, approval & disbursal of a loan, with minimum documents. No cost EMIs are a hit trend these days and mobile phones are just as important. The newer trends are luring youngsters into the latest gadgets & appliances for which they are constantly looking for short-term loans with a limited tenure in a few clicks.
4. Restructuring of Existing Loans
Many banks offer the debt restructuring facility to help hurt borrowers & put them into action. It’s also good to engage external agencies into restructuring debt. Repayment schedules chalked out after restructuring will be severe to start with, however, it will offer room for repayment at least. Many options will be made available to convert credit debts into personal loans and penalties are comfortably waived off.
5. Make use of Existing Assets
If you have existing assets, then make the best use of the assets to pay off dues. It’s much easier to get money in exchange for mortgaging your house, investments, etc. It’s a theory to remember that loans against security are available at flexible interest rates. You can also think to sell off the existing unused assets to repay your monthly installments.
You’re surely caught up if you rotate your credit debts between cards. So, if ever you feel stuck in a debt trap, cut down on your basic survival needs & fix a pattern to make repayments.
