Debt trap is a more familiar and used term for a debt spiral . This is a situation where an individual or even a whole family is unable to pay their creditors’ obligations. Which leads to penalties or other obligations by taking additional loans. The total amount and interest are thus increasing.
The most common reason for a debt trap is a poor assessment of future repayment options. As a result of the competitive struggle, lenders do not disclose all the details, which is considerably more expensive when using the product. Therefore, all the advantages and disadvantages should be carefully considered.
The most dangerous are loans up to 10 thousand and loans with maturities of less than 3 months. For these, we should be extremely careful and not be afraid to ask for help from someone who knows the issue. The fact that you own a personal identity card and you are not legal does not mean that you understand credit issues.
However, you can also get into a debt trap if you fail to pay a fine, charge, or improperly handle a credit or debit card. Jumping penalties and amounts charged are often so high that even a person with an average wage has no chance to pay them. Therefore, it is necessary to solve everything at the beginning by agreement before the claim is forwarded.
The third most common reason is job loss. When changing the income ratio, it is necessary to clarify whether the situation can be long-term and act quickly. There are options such as repayment schedule, or consolidation of multiple debts for one creditor, which then sets the repayment method. Often this option is the starting point.
If Debtor’s Debt Trap engulfs so much that it is unable to pay its obligations even at its best faith, personal bankruptcy is an option. However, this is often made possible by few people. The sooner the debtor decides to act the better for him.
If you are facing a problem with repayment, try to contact a debtor assistance institution as soon as possible. Some fall under non-profit organizations or directly under the state. You will not give anything for advice as opposed to another loan.