How to get out of a debt trap with a personal loan

Keep reading to learn about debt traps, and how to deal with it using a personal loan.
How to get out of a debt trap with a personal loan
5 min read
27 Mar 2023

Everyone desires to attain utmost comfort with respect to their finances. This does not imply that one must be completely debt-free. It is advisable to take out loans occasionally to build your credit score for your larger financial requirements.

While it may be prudent to borrow money from financial institutions, you must be sure to repay the loan on time to maintain a good credit score.

Achieving financial independence should be everyone’s goal, but getting there may need some clever navigation. Let us first understand the meaning of debt trap and take a closer look at how to navigate out of it.

What is a debt trap?

A debt trap is a circumstance where you are compelled to take out more loans than you can afford to pay off. Over time, you find yourself trapped in a scenario where your debt starts to spiral out of control and surpass your ability to repay it, and ultimately trapping you in a cycle of debt.

It is a smart move to take out loans occasionally to build your credit score. But we never want to find ourselves in a financial trap.

Here are a few reasons that could cause you to fall into a debt trap:

  • Your EMIs are greater than 50% of your in-hand salary.
  • Your fixed costs account for almost 70% of your income.
  • You have reached the limit on your credit card.
  • You have multiple debts.
  • You are unable to afford to set money aside for savings.

Personal loan for debt consolidation

Personal loan for debt consolidation is one of the most effective ways to work towards a healthier financial situation. Having multiple loans, credit card balances, etc. is not a good for your financial independence. It is essential to plan financial needs and only take on debt that one can afford to pay back comfortably to avoid getting stuck in a debt trap.

A personal loan for debt consolidation can help in some such instances where you can identify or anticipate the downward spiral of your finances in good time.

This is exactly where personal loans can help. With a personal loan, you may pay off all your other debts with just one monthly payment. However, you must keep in mind the overall cost of your loans and its impact on your financial independence.

Here is how a personal loan can help you get out of a debt trap:

  • Payments on credit cards

A credit card is a quick and simple financing option. However, it can get pricey to have unpaid balances on several cards. You can combine your credit card debts into a single EMI by applying for a personal loan.

  • Multiple loans

Keeping track of repayment becomes challenging if you have taken out multiple loans. In that instance, you can get a personal loan and use that funds to settle all your outstanding debts, so you don’t need to keep track of multiple EMI payments.

  • Diversified tenures

Having multiple loans for various large expenses can get quite difficult to manage.

It might create a confusion in planning your finances and might impact on your savings. In such circumstances, get a personal loan to consolidate all your debts and repay it over a convenient tenure that best suits your monthly financial schedule.

A personal loan to pay off debt is a smart way to get out of debt trap. This helps you not only figure out how long it will take to pay off your debt, but also manage your monthly expenses.

Bajaj Finserv Personal Loan is the best option with easy eligibility requirements. You can borrow a personal loan of up to Rs. 40 lakh with minimal paperwork and speedy disbursement of funds. And you can repay it over a convenient tenure of up to 96 months. You can also use personal loan EMI calculator to know your EMIs beforehand.



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