Debt trap: The web of debt is spreading rapidly among India’s salary earners. According to a Business Today report, SEBI-linked investment consultant Abhishek Kumar shared a case that surprised everyone.
Kumar told that a person came to him whose monthly income was Rs 2 lakh, but his installment (EMI) would be Rs 3.3 lakh. This means that every month he spends Rs 1.3 lakh more than his earnings just to repay the loan.
The world of supply and the “financial technology” trap
According to Abhishek Kumar, in the last 15 years he has witnessed many cases where people look wealthy on the outside, but are burdened with debt on the inside.
This situation has been called the “financial intensive care unit.” People often take many small loans from digital lending apps to maintain their social reputation. These apps give money instantly, but the interest rates and terms make people fall into a debt trap that is difficult to get out of.
The “battle plan” to get out of debt
To overcome this financial crisis, Abhishek Kumar proposed a five-step strategy. He says microcredit should be eliminated first. They are called “mosquito loans”, and they are large in number and increase psychological pressure.
If 6-7 small loans are closed, the monthly installment burden can be greatly reduced. In the second stage, expensive loans from fintech apps need to be repaid, because they encourage you to borrow again and again.
Bank loans and changes in behavior
Kumar advises that when you get a large sum of money (such as a bonus or cash) at once, instead of dividing it between several places, use it to close a large bank loan in its entirety.
This will improve your credit score and pave the way for a low-interest loan from the bank in the future. Also, after closing the loan, it is important to take the “No Objection Certificate” from the bank and close the credit line completely, so that there is no temptation to take the loan again.
Need to improve habits
In the end, the investment advisor says that the problem of debt is not just a mathematical operation, but rather it is linked to human behavior and habits.
Nowadays, facilities like “Buy Now Pay Later” (Buy Now Pay Later) have spoiled people’s spending habits. People take many small loans without thinking, which affects their financial health in the long run.
