Retail Loans Surge by 50% in 2022

I was reading an article about how the loans taken by Indians were surging in 2023 and found out that in 2022 itself it has surged by 50%. Taking loans is not bad but the problem is getting into the debt trap.

PC: Outlook India

Similarly I was going through some of the questions about personal finance where they were asking how to get out of debt trap of credit card worth 10 Lakhs with a salary of just Rs 70K. That's what most of the millennial is doing now, using Credit card like there is no tomorrow and defaulting it.

It will really impact their Cibil Score and they have to pay more and more interest when they take loans in the future. The problem is the basics, if we don't understand the basics then we will end up taking wrong financial decisions which will hurt us big time.

I am not saying that you should not take loans. I too have taken in my life and will take in future too. But the thing is I have closed that loan as soon as possible and will be ready to take another if required. In this way you are completing your goals which can be buying home, buying car, or any other goal earlier in life and paying for that as an EMI.

Getting into EMI is not wrong if your EMI doesn't disrupt your savings/investments and if it's manageable. I will not take millions of money on loan and end up being on huge debt. Taking small loans here and there and paying off faster is the best way to move forward.

Also people don't understand that Credit Card has the highest percentage of loan ranking from 30 to 50% which can have a huge dent on your Financials. If you have credit card debt then the next thing is to transfer that debt to less interest instrument like personal loan so that the interest is manageable.

But seeing this much surge in the Retail loans is worrisome because that means the saving will eventually get reduced as you end up paying EMI and not saving at all.