How can I avoid getting into a debt trap?
The best way to avoid getting into a debt trap is to understand the impact of servicing debt.
Nothing is more depressing or stressful than getting into financial trouble. The best way to avoid getting into a debt trap is to understand the impact of servicing debt. A lot of people don’t know that they are headed towards a debt trap till they actually get into one. We live in times when, to realise every financial dream, one takes the easy route of borrowing money. There is nothing wrong with this approach as long as one understands which loan is asset building. For instance, borrowing to buy a house is asset building; however borrowing to go on a holiday is not. A good way to stay away from getting into a debt trap is to not succumb to impulsive buying or borrowing because money is available. Most importantly, keep checking your income to expense ratio; at no time more than 45-50 per cent of it should go towards servicing loans by way of EMIs.