Question

Give an example of how credit pushes a person into debt-trap.

Answer 1

Answer:

“Since the interest on credit card loans is very high, rolling it over reduces one's repayment capacity for other loans and, if continued, for long, it will push you into a debt trap,” says Ramamurthy. If you have got into this rollover trap, getting out of it should be your top priority.

Answer 2

Debt Trap

Explanation:

The debt trap is the term that refers to a situation where a person takes a loan and is unable to repay it and gets more indebted. This scenario is common in rural areas, especially in the agricultural sector. The farmers could take a loan for expenses like seeds, fertilizers, pesticides or other farming equipment. But unfortunately, if the monsoon fails or the crops get damaged due to adverse weather conditions, they will not be able to repay the loan and would get further indebted to pay the interest or take another loan, which finally renders them in a debt trap.