The ‘trap of debt’ is more dangerous than the ‘illusory Trap of Indra’Image Credit source: Representative Photo

As soon as the festive season starts, we all start updating our shopping list. Everything from clothes, shoes to gadgets are included in our list and we eagerly wait for the upcoming sales on malls, brands and e-commerce websites. But have you ever thought that during the sale, we buy many such things which we do not even need in realty. While shopping online, we also do impulsive shopping in the greed of discounts. This habit can put you in big trouble, and can trap you in the Debt Trap of the bank.

Nowadays, the trend of purchasing through credit card, no cost EMI or buy now pay later options is increasing among people. During its recent ‘The Great Indian Festival’ sale, Amazon received 25% of the orders which were placed by people on some kind of credit facility. Of these orders made through EMI options, 3 out of every 4 orders were made only on ‘No Cost EMI’. This habit is putting people into debt trap. In this explainer, understand what is debt trap and how can it be avoided?

What is Debt Trap?

You must have often heard your parents saying that hobbies cannot be fulfilled by taking loans. Actually this comes from his personal experience. By taking loan, we fulfill our hobbies, buy clothes or buy an expensive gadget like iPhone on EMI. This is where your debt trap begins.

See also: This is the mathematics of cashback in the festive season, is it really saving your money or a source of income for companies?

When you become excessively dependent on credit cards or loans for shopping etc., then it starts seeming like ‘easy money’ to you. That’s why you keep shopping on loans and increasing their EMIs one after the other. Then a situation arises when you have to take another new loan to repay one of your loans. This is ‘debt trap’. That means you keep sinking into the mire of debt and are never able to come out of it.

After all, how to avoid ‘debt trap’?

The debt trap can also be avoided. By adopting some tips while shopping, especially during the festive season, you can avoid the ‘trap of debt’ which is even more dangerous than ‘Indra’s illusion’.

1. If you want to avoid getting trapped in the ‘debt trap’, then first of all you will have to control your expenses. You will have to spend according to your income and stop unnecessary expenditure.
2. When you shop during the festive season, buy only essential items. Avoid impulsive shopping and make a list of items in advance.
3. If you already have a lot of debt, then the first thing you should focus on is eliminating it. One should think about taking a new loan only after repaying it in full.
4. Before shopping on credit card or EMI, analyze your income. So that you can see that paying EMI will not affect your remaining expenses.
5. If your loan is too much or you are facing problem in repaying it. Then first consolidate your different loans and get them restructured. With this, instead of paying EMI at different places, you will have to pay only one EMI.
6. The most effective way to avoid the debt trap is to maintain your emergency fund in advance, so that you do not have to take a loan when needed and the emergency fund can be used.