Have you Ever Thought What Would Happen if Anyone Gets Caught in a Loan Trap?
May 25, 2017 Home Loan
We have come across many people known to us who have taken a loan and thereafter, the income source from where this loan must be repaid gets dried up.And to overcome this situation one applies for a personal loan to repay the previous loan and the process continues. And this leads to a situation which is referred as “Loan Trap”.
So, if at any point in time, if someone is found caught in a loan trap, he/she could consider taking the following steps:
1) Cut down household expenditure:
Many of us would hesitate to do that as its a very simple and small step, but big things happen when many small steps are combined together.The steps can range from moving to a smaller house, cut down extra luxuries like movies, restaurants, clubs, outstation trips, etc.. And these things will definitely won't affect much the core of your life however it would bring down your monthly expense to 5-10 percent.
2) Manage your savings:
Keep a minimum balance in your account and invest more on higher interest earning investments. Fixed/recurring deposits are one of them as interest earned would be more than a savings account.
3) Knowing the interest rate structure:
All lending finance institution have an automated process of resetting the loan interest rates. And it is quite possible that you are paying a higher interest rate compared to what you were paying at the beginning of the deal. So the best way to overcome such situation is to pay a one time fee to restructure your interest rates.
4) Maintain your credit score:
Always make sure to repay your loans and credit card bills on time. Usage of the credit card must be in a limited manner and for any expense that you incur must be paid in cash. Always make a list of outstanding loans and prioritise which one needs to clear first.
5) Extra Income sources:
It is always advisable to take up some freelance work to earn some extra money which will definitely help you to cope up with the current financial crisis.
6) Last but not the least don’t let depression ruin you:
Always keep yourself motivated and look at things positively. It may test your patience for a short period of time but would surely get the benefit in the long term.
With all the steps discussed above gradually one can definitely come out of the loan trap.
So, if at any point in time, if someone is found caught in a loan trap, he/she could consider taking the following steps:
1) Cut down household expenditure:
Many of us would hesitate to do that as its a very simple and small step, but big things happen when many small steps are combined together.The steps can range from moving to a smaller house, cut down extra luxuries like movies, restaurants, clubs, outstation trips, etc.. And these things will definitely won't affect much the core of your life however it would bring down your monthly expense to 5-10 percent.
2) Manage your savings:
Keep a minimum balance in your account and invest more on higher interest earning investments. Fixed/recurring deposits are one of them as interest earned would be more than a savings account.
3) Knowing the interest rate structure:
All lending finance institution have an automated process of resetting the loan interest rates. And it is quite possible that you are paying a higher interest rate compared to what you were paying at the beginning of the deal. So the best way to overcome such situation is to pay a one time fee to restructure your interest rates.
4) Maintain your credit score:
Always make sure to repay your loans and credit card bills on time. Usage of the credit card must be in a limited manner and for any expense that you incur must be paid in cash. Always make a list of outstanding loans and prioritise which one needs to clear first.
5) Extra Income sources:
It is always advisable to take up some freelance work to earn some extra money which will definitely help you to cope up with the current financial crisis.
6) Last but not the least don’t let depression ruin you:
Always keep yourself motivated and look at things positively. It may test your patience for a short period of time but would surely get the benefit in the long term.
With all the steps discussed above gradually one can definitely come out of the loan trap.
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