5 ways to avoid the debt trap

Taking new loans to repay existing debt obligations is known as a debt trap. Before you know what a debt trap is, you've fallen into one, your debt has spiraled out of control and you owe more than you can manage. You can find yourself in this situation when you have more debt obligations than you can payback.
Suppose your income is inadequate to pay off your debts; therefore, interest will accumulate rapidly on the outstanding amount of your loan.
So, how do you keep your debt within reasonable limits and avoid a debt trap? Most importantly, how can you avoid falling into debt traps unexpectedly? Check out these 5 tips and have a debt-free future. Spending is disciplined and meticulous but they don't have to be complicated.

Avoid too Many Loans:

A pro-tip is to avoid taking out too many loans, with monthly EMIs not exceeding 45% of your gross income. We risk getting into trouble by exceeding this limit. In general, unsecured loans, such as a car loan or a personal loan, indicate poor credit behavior and for that reason, we need debt counseling. Securing your loan portfolio by taking up a mortgage is recommended. You should pay off all unsecured loans first.

Emergency fund:

In these "just-in-case" situations, having emergency savings can be very useful. Saving at least six months of your salary is the most effective strategy when trying to establish an emergency fund. It could be used in the event of unemployment, when you are injured and unable to work, or if you need money for an unexpected, yet necessary, expense.

Increase Your Income:

If you need a second source of income, look for a second job. In order to settle your debts quickly, you should allocate your secondary income to debt. Earning an additional income can take many forms. Ensure the job you take is relevant to your experience, abilities, and knowledge.

Prioritize your needs:

Based on your analysis, you will know the essential, semi-essential, and non-essential items. Sort your list according to priority. It is advisable to refrain from purchasing non-essential or luxury items if you are in debt. On the other hand, semi-essential items add comfort to your life but are not necessary for survival. You may be able to find cheaper alternatives to these items. In order to minimize your debt repayment obligations, it is a good idea to forego non-essential and semi-essential items.

Don't carry too many cards:

Don't carry too many cards. If you have multiple credit cards, you will also have many tacked-on interest cases. In the event that you cannot manage the cards properly, then you may need a debt consolidation loan later on. Each time you accumulate charges on your credit card, it's easier to lose track of your expenditures and payments.