Debt can be a significant financial burden for many individuals, and it can be challenging to get out of it once you’re in. In India, many people find themselves in a debt trap due to a variety of reasons. In this essay, we will discuss some of the most common reasons why people get into debt in India.
- Unexpected expenses: One of the most common reasons for getting into debt is unexpected expenses. These can include medical bills, car repairs, home repairs, or other unexpected financial events. These expenses can quickly add up and put an individual in a position where they cannot pay off the debt.
- Lack of emergency savings: Many people in India do not have an emergency fund to fall back on when unexpected expenses occur. This lack of savings can lead to an individual having to rely on credit cards or loans to cover these expenses, which can quickly spiral into debt.
- Living beyond means: Another common reason for getting into debt is living beyond one’s means. This can include buying things on credit that one cannot afford, such as a new car or a larger home, or spending more than one earns on a regular basis.
- Lack of budgeting and financial planning: Many people in India do not have a budget or financial plan in place. Without a budget and financial plan, it can be difficult to keep track of expenses and make sure that one is living within their means.
- High-interest loans: In India, many people take on loans with high-interest rates, such as personal loans or credit card debt. These loans can have interest rates as high as 30%, which can make it difficult to pay off the debt in a timely manner.
- Unforeseen job loss or pay cut: Unexpected job loss or pay cut can also be a major reason why people get into debt. With a reduction in income, it becomes challenging to pay off debts and bills, and many people find themselves falling behind on payments.
- Lack of financial literacy: Many people in India lack financial literacy, which can lead to poor financial decisions. Without understanding the terms and conditions of loans and credit cards, it can be easy to get into debt without realizing the full extent of the situation.
- Peer pressure: Peer pressure is also a common reason for getting into debt. Many people in India feel pressure to keep up with the lifestyle of their friends and family. This can lead to buying things on credit that they can not afford.