Personal loan: Can you imagine a loan becoming so enormous that a borrower might consider taking his own life to avoid repayment or even go so far as to fake his death?
Something like this happened in Madhya Pradesh’s Rajgarh district, where a man faked his own death to evade ₹1.40 crore in loans. He reportedly sank his car in the Kalisindh River to create the impression that he had died.
But the rescue mission failed to trace his body. Finally, when he was traced to Maharashtra, he confessed that he did this to get the loans waived off based on proof of death.
This is quite a bizarre and unusual case. This teaches us a number of money lessons.
Money lessons one can learn to avoid a debt trap
I. Loans up to a certain threshold: It is not advisable to take a loan beyond a point. Typically, one should not take a loan that leads to an EMI equivalent to over 50 per cent of one’s monthly salary.
II. Refinancing is an option: Another option is to opt for refinancing. This means rolling over the loan future. When you roll over in future, your EMI burden reduces.
III. Speak to the lender: At times, it is better to speak to the lender to request pausing the EMI. The lender may even turn down the request, but not always.
IV. Lower interest rate: Sometimes, you could go for migrating the loan from one lender to another which charges a lower rate of interest. This also leads to a lower EMI.
V. Category of loan/ lender: Different categories of loans and lenders charge different interest rates. For instance, the interest on a personal loan is higher than that on a business loan, and banks charge a lower rate of interest than NBFCs. Therefore, it is recommended to choose the right loan category and lender to keep the EMIs lower.
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