11 signs that show you are falling into a debt trap
For a large section of people, particularly the salaried class, debt is unavoidable. However, borrowing irresponsibly can land you in trouble. According to an ET Wealth survey, 15% of the respondents have an EMI outgo of more than 50% of their income. The survey was conducted in March and had 2,042 respondents from across the country, age groups and income levels.
Surprisngly, 32% of the respondents with EMIs of more than 50% are senior citizens—people who have fixed incomes. The survey also showed that one out of five respondents have taken loans to repay existing loans in the the past one year. Taking a loan to repay another is a classic indicator of falling into a debt trap.
In this week’s cover story, we explore warning signs that could show whether you are headed towards a debt trap. “Debt is not a bad thing. But you need to plan properly, so that you don’t get into a debt trap,” says Manav Jeet, MD and CEO, Rubique, an online marketplace for financial products.
Sudden events like a job loss, a medical emergency, etc. can force one to borrow beyond one’s repayment capacity, says says Vinod N. Kulkarni, a financial counsellor. “Salaries getting delayed has also become a major factor leading people into debt traps as they try to survive on credit cards,” adds Arun Ramamurthy, Founder, Credit Sudhaar. These sudden shocks can be avoided by maintaining a contingency reserve of around six months’ income and having insurance.
But it is often the slow, gradual slide into a debt trap that can prove more dangerous as it goes unnoticed till the person is neck deep in it. We point out the red flags, so you can take corrective measures, if need be.
For a large section of people, particularly the salaried class, debt is unavoidable. However, borrowing irresponsibly can land you in trouble. According to an ET Wealth survey, 15% of the respondents have an EMI outgo of more than 50% of their income. The survey was conducted in March and had 2,042 respondents from across the country, age groups and income levels.
Surprisngly, 32% of the respondents with EMIs of more than 50% are senior citizens—people who have fixed incomes. The survey also showed that one out of five respondents have taken loans to repay existing loans in the the past one year. Taking a loan to repay another is a classic indicator of falling into a debt trap.
In this week’s cover story, we explore warning signs that could show whether you are headed towards a debt trap. “Debt is not a bad thing. But you need to plan properly, so that you don’t get into a debt trap,” says Manav Jeet, MD and CEO, Rubique, an online marketplace for financial products.
Sudden events like a job loss, a medical emergency, etc. can force one to borrow beyond one’s repayment capacity, says says Vinod N. Kulkarni, a financial counsellor. “Salaries getting delayed has also become a major factor leading people into debt traps as they try to survive on credit cards,” adds Arun Ramamurthy, Founder, Credit Sudhaar. These sudden shocks can be avoided by maintaining a contingency reserve of around six months’ income and having insurance.
But it is often the slow, gradual slide into a debt trap that can prove more dangerous as it goes unnoticed till the person is neck deep in it. We point out the red flags, so you can take corrective measures, if need be.
