People often think a debt trap happens because of lifestyle creep or overspending. However, a LinkedIn post shows how the reality is much scarier. A financial advisor shared about a professional who accumulated ₹15 lakh in debt without making a single ‘reckless financial decision’.
“A 36-year-old operations manager from Pune earning ₹90,000 a month is now ₹15 lakh in debt, though he never made a reckless financial decision. 3 years ago, he was earning ₹90,000 and spending ₹82,000 on essentials. Tight, but workable,” investment advisor Vivek wrote on LinkedIn.
Explaining how the man ended up with a huge debt, the advisor continued, “Then his father needed urgent surgery costing ₹5 lakh. He took a personal loan at 14%, with an EMI of ₹13,663 a month. That single decision quietly broke his budget. His monthly outgo went from ₹82,000 to nearly ₹96,000, against the same ₹90,000 income. He was now short every month.”
To manage, the man started using his credit card for groceries and fuel. “Within a year, that balance hit ₹4 lakh, with a ₹20,000 minimum payment at 40% interest. So he took a second loan of ₹6 lakh to consolidate the mess, but because his credit score had already dropped, this one came at 18%, and the EMI was ₹17,625.”
{{/usCountry}}To manage, the man started using his credit card for groceries and fuel. “Within a year, that balance hit ₹4 lakh, with a ₹20,000 minimum payment at 40% interest. So he took a second loan of ₹6 lakh to consolidate the mess, but because his credit score had already dropped, this one came at 18%, and the EMI was ₹17,625.”
{{/usCountry}}He became entangled in the debt trap even more in the next two years, and the total amount crossed ₹15 lakh, with him spending “57% of his take-home salary”, around ₹51,000, on debt. “Every new loan was paying off the old ones.”
“This is how a debt spiral works. One loan adds an EMI, which shrinks your cash flow, which forces the next loan,” the advisor continued. Vivek added what pushes someone deeper into the debt trap.
“If your monthly EMIs are already above 40% of your take-home, treat it as a warning.” He continued that the if someone is in such a situation the first thing they should do is stop taking new loans. “Then list every balance and interest rate you owe and start clearing the highest-interest debt first.”
What did social media say?
An individual wrote, “I always tell people - build an emergency fund before you need it. As it is much cheaper than borrowing later.” Another posted, “The line about every new loan paying off the old one sums it up. By then, you're no longer solving the problem, you're just buying time.”
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A third commented, “Such an important reminder. I've seen that financial stress is rarely about one big mistake. It's usually a series of small decisions made when options feel limited.” A fourth shared, “Debt spirals are rarely caused by one big mistake. They're usually the result of small compromises made month after month.”
(Disclaimer: This report is based on user-generated content from social media. Hindustantimes.com has not independently verified the claims and does not endorse them.)