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5 Danger Signs of Debt Trap that You Need to Know

By Finserv MARKETS - Jul 26,2019
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Signs that indicate you are in a debt trap

Managing your finances efficiently implies that you have to try and keep your monthly expenses low. However, due to the easy availability of a personal loan and instant credit, most people get distracted. In case, you feel that your current financial situation is overpowering you, then you might as well want to check for debt trap signs. Wondering what the debt trap signs are? Keep reading.

Let us begin by understanding what is a debt trap?

As the name suggests, a debt trap is a situation wherein it becomes difficult for an individual to repay the loan amount. This happens mainly because of the high-interest payments which prevent them from repaying the principal amount. Being trapped in debt is not something you would desire. Not only it takes a toll on your finances but makes it difficult for you to avail any loan in the near future.

Following are 5 signs indicating that you are falling in a debt trap:

  • Monthly Installments Exceed 50% of Your Income

  • You Have No Savings

  • Making Minimum Credit Bill Payments

  • Loan to Repay a Loan

  • When Banks Refuse Your Loan Application

1: Monthly Installments Exceed 50% of Your Income

Do not fall victim to easy EMIs, discounts, and sales. Spending compulsively can take a toll on your finances and push you more towards a debt trap.

Every month there is a sale put on different items. Most people cannot control themselves and end up purchasing things on EMIs. Even though you think that these EMI amounts are not that huge, when you add the various EMI obligations, you end up having little to no money for your other necessities.

2: You Have No Savings

To have a financially secure future, it is important to have multiple investments and savings. But if you happen to save no money from your monthly income, then you might be in trouble.

Continuing this habit will keep you from building your wealth. Eventually, you may not be able to achieve your financial or life goals such as buying your own house, starting a business venture or planning your dream wedding.

Moreover, to meet your financial needs, you will be forced to borrow money from banks and other sources. This thus increases your chances of falling into a debt trap.

3: Making Minimum Credit Bill Payments

Paying only the minimum credit bill is a sign that you are in a debt trap. The minimum amount due is usually the interest amount on your spending. It is required to be paid for a particular bill cycle in case you are unable to clear the entire outstanding amount at one go.

It is however noteworthy that even if you clear 90% of your credit card bill, banks will charge interest on the entire amount in the next bill cycle and not on the 10% outstanding. Hence, it is highly advisable to clear the entire credit bill in one go.

4: Loan to Repay a Loan

If you happen to take a loan for repaying another loan amount, it only means that you are falling into a debt trap. Most people consider doing this, thinking that they will be able to handle the finances in the coming month. However, know that this will only lead you more into debt and not get you out of it.

Also learn how you can pay off your credit card debt with personal loan

5: When Banks Refuse Your Loan Application

Usually, banks reject loan applications of people with a poor credit score. Although the acceptable credit score ranges from 300 to 900, only scores more than 750 are considered good by the banking institutes. So, if a bank rejects your loan application because of your poor credit score, know that you are in a debt trap.


Looking for a personal loan that does not impact your credit score and has reasonable EMIs? Get in touch with us at Finserv MARKETS and benefit from our features like low EMI and minimal documentation. The loan application is approved within minutes and the loan amount is credited in your bank account within 24 hours!

Apply for Bajaj Finserv Personal Loan with us, today!

Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and exclusive EMI store, all under one roof- anytime, anywhere!


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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522