5 things you need to know about debt trap

1.A debt trap occurs when one struggles to repay borrowed funds, leading to a cycle of taking on more loans to cover previous debts.
2.Excessive use of credit cards, high-interest loans, unplanned spending, and job loss are major contributors to debt traps.
3.Debt traps can lead to financial stress, reduced credit scores, and difficulty in securing future loans.
4.One can avoid getting into a debt trap by paying off loans, starting with high-interest debts.
5.Debt consolidation, or combining multiple loans into one with a lower interest rate, can help manage repayments more effectively.

Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.