5 warning signs that you are trapped in debt cycle:EMIs exceed 50% of income, breaking investments to pay bills more

If borrowed money is managed properly, it can be useful in emergencies and help build assets. However, uncontrolled borrowing can push you into a debt trap. It is important to recognize its warning signs in time. There are two types of debt: 5 key signs that show your debt is getting out of control: 1. Paying only the minimum due If you are paying only the minimum due on your credit card, your principal amount remains almost unchanged while the interest continues to increase. This is the first and major sign of growing debt. 2. Taking a New Loan to Repay an Existing Loan Taking a new loan to repay an old one indicates that the repayment cycle has already become unmanageable. Doing so can trap a person in a never-ending cycle of debt. 3. More Than 40-50% of Income Going Toward EMIs If more than 40% to 50% of your monthly income goes toward EMIs, very little remains for savings. For example, if your salary is ₹1 lakh and ₹60,000 goes toward EMIs, this is a sign of excessive debt. 4. Not Keeping Track of Total Outstanding Debt Not knowing the total amount of debt across different accounts indicates financial disorganization. In such a situation, make a list of all your debts. 5. Using Savings or Investments to Pay Bills If you are having to dip into your emergency fund or redeem mutual funds to pay for everyday bills and expenses, it means your income can no longer support your lifestyle. The Way Forward: Proper Planning and Discipline Debt is not inherently bad; it becomes a problem when it is not managed properly. By recognizing these signs in time, creating a disciplined budget, and seeking help from a financial advisor when needed, you can improve your financial situation. Knowledge Box: What is a ‘Debt Spiral’? When a person repeatedly takes on new debt to pay the installments (EMIs) or interest on their existing loans, they become trapped in a cycle of debt that can be difficult to escape. In financial terms, this is called a ‘debt spiral.’ The first rule to avoid this is to never take a new unsecured loan to repay an old loan.