It was a Monday, and as I began work, a debt counselor informed us that a customer was under extreme stress due to repeated calls from collection agents forcing him to repay the debt he owed.
In recent times, India has seen a rise in debt. Household debt for the year ending March 2023 experienced its second-highest surge since independence. Moreover, household savings dropped to 5.1% of GDP in the same period, compared to 7.2% in the previous fiscal year. This means that households are saving a smaller portion of their income compared to what they were saving, which is a concern.
Another point that is concerning is that the government states that between April 2021 and November 2022, the Reserve Bank of India (RBI) received almost 13,000 complaints against recovery agents.
While savings are declining and coercive practices continue, obtaining a loan has surprisingly become more accessible with the proliferation of loan apps.
The ease of loan accessibility and marketing tactics has drawn many individuals into a credit trap, often aspiring to maintain a good lifestyle. Unfortunately, after acquiring these loans, many find themselves struggling to repay, leading to coercive collection practices, resulting in severe mental stress with nowhere to turn for help.
In recent times, the need for therapy under the growing debt burden has become more apparent. Let's understand the issue further:
The Alarming Rise in Debt Cases: As savings decrease, individuals are left with limited resources to handle unexpected expenses, pushing them towards borrowing to meet their daily needs. This increase in household debt indicates that more people are struggling with financial challenges and are having mental stress.
Rise in Fraud Cases with the Coming of Loan Apps: The availability of loans through various apps has simplified the borrowing process but has also given rise to an increase in fraudulent activities. This often occurs when apps provide loans to users with malicious intentions and design their services with deceptive descriptions. Now, imagine an individual who is already in debt and then falls victim to this fraud making them more likely to experience mental anguish.
Aspiration-Based Spending: Many individuals are motivated to take loans to improve their lifestyle, fulfill aspirations, or meet urgent financial needs. However, the ease of obtaining loans sometimes results in people borrowing without a clear repayment plan, forcing them into a debt trap which brings a lot of mental and financial stress.
Debt Trap and the Need for Help: Once individuals find themselves unable to repay the borrowed amount and face various coercive collection practices, all of this cumulates to take a financial strain but also takes a toll on their mental well-being. Feeling trapped and overwhelmed, many still struggle to find a way out.
In the end, we can say that everyone has their own coping mechanisms when faced with adversity, and we completely understand it. Financial challenges can lead to anxiety, depression, and a sense of hopelessness. Professional counseling through experts along with tips on financial management can work as therapy and act as a great coping mechanism for individuals in a debt trap. We at FREED are always ready to listen to you.
