New Delhi:
People can now fulfil their dreams thanks to credit cards, EMIs, and loans. People are now in debt to fulfil their needs or hobbies, or they are drinking ghee by taking loans. People are falling into debt as a result of their desire for easy money.
What is debt trap?
A debt trap is defined as an uncontrolled increase in debt. You get into this situation when you spend more than you earn. You could end up with a mountain of debt if you are not careful.
Identify the issue
Consider the current situation. Make a plan for dealing with the areas over which you have control. By taking a closer look at your current financial situation, you may be able to resolve your loan problems.
Set your priorities
Set your priorities. Then, divide your spending into three categories. Optional, semi-optional, and essential Make changes in your behaviour or lifestyle to spend less on semi-essential and non-essential products.
Consider repaying loan
If you want to pay off your loan, you can do so with a single loan that covers all of your obligations. You only have to worry about repaying one loan rather than several loans with varying interest rates and due dates.
Leverage your investments to pay off debt
You may be able to reduce your debt obligations if you have invested in high-yielding schemes such as mutual funds or bank deposits.
Stop taking on new debt.
Taking on additional debt to pay off existing debt adds to your financial and emotional stress. So, at all costs, avoid them.
Set aside money for unforeseen events.
It is critical to keep a separate emergency fund to deal with any unforeseen financial situations that may arise. An emergency fund should have enough money to last three to six months. This fund allows you to get through tough times without taking out a loan.
This money can be invested in a variety of high-liquidity investment vehicles. Although a bank savings account is a convenient way to save for an emergency fund, it does not provide much in the way of interest or dividends. As an alternative, consider putting your emergency funds in chit funds, which guarantee instant liquidity and high returns on your money.
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