Signs You May Be Heading into a Debt Trap—and How to Stop

Debt traps don’t appear overnight—they build up silently through overspending, missed payments, and borrowing to repay other debts. Here’s how to recognize the red flags before it’s too late.

Warning Signs:

1. You’re Only Paying Minimum Dues on credit cards every month.

2. You Borrow to Repay Existing Debt—a classic sign of spiraling credit.

3. You Don’t Know Your Total Debt—meaning no clear plan or awareness.

4. Your EMI-to-Income Ratio > 40%, leaving little for other expenses.

5. Lenders Start Rejecting Your Applications—your credit score may have dipped.

6. You Avoid Checking Statements or Emails about bills and dues.

What to Do Immediately:

• List All Debts with amounts, interest rates, and due dates.

• Cut Unnecessary Expenses to free up cash for repayment.

• Start a Debt Snowball or Avalanche Plan—pay off smallest/highest-interest debts first.

• Avoid Taking New Loans unless consolidating for lower interest.

• Seek Professional Help if overwhelmed—debt counselors can assist.

Protective Habits:

• Always maintain an emergency fund.

• Set up auto-debits for EMIs to avoid late fees.

• Use credit only for needs, not wants.

Conclusion: 

Catching yourself early is key. By shifting habits and tackling debt head-on, you can break free from the cycle—and protect your financial future.

Reference:

SEBI Investor Charter, CreditMantri, MoneyControl