Signs You’re Getting into a Debt Trap
The very term “Debt” can send shivers down the spine of even the brave-hearted. It’s a grim scenario where you’re bogged down by several loans on all sides and are clueless how to make ends meet. A debt trap is caused by poor management of your personal finances.
The thumb rule is that, if you have a debt, try to eliminate it as quickly as possible. However, this is easier said than done. Most often people make the grave mistake of borrowing more to repay existing debts. Over time, debt reaches a staggering level, which becomes impossible to break free from.
Your financial health plays a crucial role in helping you get the best home loans, best personal loan or auto loans. So, it’s essential that you do not fall into debt traps.
In fact, the sad thing about a debt trap is that people do not realize until it’s too late. Debts do not come with thunder and lightning signaling its arrival. Rather, debts creep slowly over the years, and most people fail to realize and recognize the warning bells.
The good news is that the earlier you spot these warning signs, the easier it is to break free from debts. Here are the top seven signs that indicate you’re caught in the vicious grip of a debt trap.
-
You use credits cards for all your purchases
If you have the habit of swiping your credit cards for all your purchases, then it’s time to ditch that habit. It’s true that credit cards are convenient. You needn’t carry wads of cash in your wallet, and you needn’t pay for all your shopping immediately. However, remember that it’s you who will end up paying for it after a month. So do not make unnecessary purchases. Try to learn the art of being frugal.
-
Your Spending is linked to your Social Status
A very common scenario that most people face today is the need to maintain a false illusion to impress friends and family. This leads them to adopt a lifestyle that is beyond their income. The odds are that this will lead you to get stuck in debt unnecessarily.
-
Indiscriminately availing loans
Borrowing a loan to invest in assets like a home or property or to buy a car is understandable and in fact even encouraged. However, borrowing personal loan with high interests just to buy the latest gadget on the market or to go on a fun trip abroad is a big no-no.
-
You are clueless about your Spending
Almost everyone has a clear picture of their pay. Sadly, a majority fail to track their expenditures every month. This could lead to your expenses overtaking your income, leading you to fall into the pits of debt traps.
-
You have exhausted your Borrowing Limit
Banks allow you to borrow up to a certain limit. Once you cross that threshold, it signals that you are headed on the slippery paths of debts.
-
You have no Savings
If at the end of the month, you’re left with no cash to save, then you’re likely to meet with big financial trouble shortly. At the end of the month, you should be able to save at least 10-20% of your income.
-
You take more Loans to repay existing loans and bills
Do you always search for personal loans with poor credit or home loan with bad credit or vehicle refinance without a credit check? This is a sure indicator that you’re headed for financial trouble. Also, if you regularly borrow from friends and family, to repay your bills, then it’s time to seek expert help.
Do you notice any of these signs in your daily life? If yes, pause, analyze your financial situation, seek help and pull yourself free from the clutches of the debt traps.
