Stuck In A Debt Trap? Here’s What You Need To Do

debt trap

Debt Trap

Stuck in a debt trap? Don’t worry, we’re here to help.

Our Bollywood films often mention the word ‘karzz’ and in various references. As we would all know karzz translates into debt.

Be it money or anything. Debt is Debt. Let us start on a history of what debt is and its various types since David Graeber has already done so in his enormous turnip-like 560 paged informative novel, “Debt: The First 5,000 Years”.

A great piece of literature though. Many may not agree with each and everything Graeber has discussed. But some parts were quite intriguing. 

Did we know that the first heard word for ‘freedom’ in any known human linguistic system is the Sumerian term ‘ama-gi’, which directly translates into ‘return to mother’ — as this was what debt-free people were only accessible to carry out.

So naturally, one might think on reading that piece of literature would be, “Oh my God the first word for ‘freedom’ means ‘debt-free’!

No wonder why invisible chains exist on our existence!”

Is debt really that scary? Some might say yes while others might say no and pose debates that society would thrive more if everyone became frugal.

Even economics experts cannot come up with one certain answer. Let us look at it from one perspective and that is that of the firms.

Surely debt is good for the economy when businesses are given the opportunities to make more money when an individual buys their products, irrespective of whether is suits the budget of that individual.

Note that debt is not good for you, the misused individual.

“If you have debt, you’re not a free person. You’re explicitly owned by your debt and implicitly owned by the creditor.” — Jacob Lund Fisker

How to avoid a debt trap

As we proceed, I would like to add that this essay is not focusing on people who fail to pay back their debts. Neither the case of somebody who is availing borrowed money from a financial institution so as to commence a business.

Here we are focusing on the type of human who does not save his or her earned money, borrows it unnecessarily and uses loans to buy consumables such as a car, furniture, or electronics.

That’s not all. They will still (shamelessly) visit restaurants, and/or drive a car worth more than 50 lac rupees. You may cringe as you read this for you surely know who you are.

This is specifically for you and only you.

The quickest and most efficient mannerism in which to do away with debt is to time travel to the past and avoid creating it in the first place. If you are unable to do that, well here outlined are a few tips and tricks.

Avoid A Debt Trap By Looking at Your Debt As An Urgency

Many economists will advise the individual to “budget” and divide their respective paycheck into sections such “debt payment” right beside “miscellaneous spending” and “savings”.

It is vital to realize that your debt is not something you have time to think about and solve. It is a BIG URGENCY that needs to be done away with it IMMEDIATELY.

Why so?

Due to a tiny necessity imposed known as interest. It is so tricky, that you will hear some people often quoting things such as “I don’t have to worry so much about my debt, the interest is barely 2%”.

That is the issue then and there!

Interest is certainly not a tiny thing. It is more like a dustmite or a pest. Small but large in damage.

Don’t Deal With A Debt Trap, Kill It

Somehow being financially successful is heavily based upon how well one can manage their debt. If done well enough, one can earn the well acclaimed tag of “high credit”.

The issue here lies in here such that tackling debt should not be a goal.

Getting rid of it, should.

For the average debt-dealer, the meltdown would be the run-of-the-mill turnaround in the economy (which happens every decade or so, like the 1999 dotcom bubble collapse, or the 2008 recession), followed by a job loss.

That is when all hell breaks loose.

Thus, it is a wise person’s advice to not spend time and energy on analyzing how to borrow more money and manage the tension. Trust me, there is an infinite number of more useful skills which would likely include simply paying off your debt. 

How To Get Rid of the Debt Trap

Now, the focal point.

The best way to get rid permanently off debt is by initiating by paying off the smallest amount first.

For, you know, drops make an ocean. It is important to remember the psychological significance of this as well. By initiating with small payments you will eventually pay more and more as you go.

It is sensible indeed.

The issue lies, in the meantime, you are slaving off by paying the high-interest fees! There is thus n o perfect option to get away with debt but you have to anyway.

If we were to take expert opinion, it would be something like this:-

Curb spending by a big amount

In the meantime, it is wise to know that while you’re in debt is not the time to “enjoy life” by traveling or going out with friends, and thud operate accordingly.

You are in social and economical unrest, and interest will add more unrest to your unstable state.

What you can do is to find roommates so that shared rent and what not.

Also, do not go out.

Walk to work.

Survive off ghar ka daal chawal which you found too simple for your fancy taste buds.

Continue this Until and unless you are totally debt-free.

The less you will spend, implies that you will need less and therefore the less you will spend and everything will be back to normal.

Pay the high interest debt first.

It is best to do away with the major problems first, isn’t it?

Do keep in mind that, if you wish to achieve the fastest results, commence with the high interest debt first and get away with it so that it doesn’t continue building up and land you in a viscous cycle.

What About Borrowing Money?

If one borrows money for a harmless reason and barely spends any of it then it is applaudable. However, do not even think about borrowing money for a Big Fat Indian wedding or even vacations! Irrespective of the rate of return.

What if we get lucky?

We all (wish to) have a lucky break or two in our lives including instances of a raise/ bonus at work, some inheritance, or a strike at the lottery.

What to do with the extraordinarily received money? Buy a gold set from PCJ? Or an Audi A8 and go for a long drive?


Every extra money that you earn or get is to go towards paying off your debt first.

Prioritze, economize.

Surely, when you are done, you could spend it. But a smarter option would be to add it to your investments so you can retire in peace and not be a burden on your next gen ultra modern children.

Winding up, let us now focus on what to do with your next monthly paycheck.

  • Spend as little as possible.
  • Make the minimum pay on each debt to avoid any penalties whatsoever (and maintain that good CIBIL score).
  • Put everything that is left towards the debt with highest interest first.

You will then see, that your debt is all gone!

What is a debt trap?

A debt trap is when you’re unable to get out of debt no matter how hard you try. In simple terms, it means that the rate at which you debt is growing is greater than the rate at which you’re able to pay it off.

Why should I avoid falling in a debt trap?

You should avoid falling into a debt trap because a debt trap is a surefire way to destroy your finances over the long term.

How can I avoid falling in a debt trap?

The best way to get rid permanently off debt is by initiating by paying off the smallest amount first and then moving onto the bigger amounts, one by one.

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