what is meant by term dept trap?
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In simple terms, it means your earnings are going towards interest payments and you are unable to reduce principal and manage day to day expenses.
Alternatively, it means any sudden expenses are able to push you into this.
Alternatively, it means any sudden expenses are able to push you into this.
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Debt-trap is a situation in which a person after taking a loan is not able to pay back the loan.
It is more common in rural areas because
(i) A borrower repays a loan by selling the agricultural produce, which sometimes may not be enough to repay the loan.
(ii) Rural borrowers normally depend on informal sources of credit who charge a high rate of interest. This repayment of larger amounts may sometimes be larger than their income.
Thus, it can be concluded that loans from banks always help to raise^people’s earning capacity.
It is more common in rural areas because
(i) A borrower repays a loan by selling the agricultural produce, which sometimes may not be enough to repay the loan.
(ii) Rural borrowers normally depend on informal sources of credit who charge a high rate of interest. This repayment of larger amounts may sometimes be larger than their income.
Thus, it can be concluded that loans from banks always help to raise^people’s earning capacity.
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