Lifestyle of urban people is changing rapidly, due to the increase in their income. The increase in earning capacity increases the expenditure power of the customer. Now days, the luxuries things of olden days are the necessities in today’s life. Therefore, there is tremendous growth in household appliances due to increase in the demand of grey, white and brown goods. It has also been noticed that there is change in their expenditure pattern. Now people rely more on credit purchasing. This is due to easy availability of various loans and credit card.

The person can buy things from loans, i.e. personal loan and can repay the loan amount with easy installments. However, everything in this world has positive points as well as negative points.  This pattern of spending has increased the defaulter list; as sometimes the person is not able to bear debt burden that result in default of payment.

Most of the persons now spend 30-40% of their income in clearing off their debt burden by repaying the loan amount. This is so, because mostly people purchase, especially consumer durable goods through personal loan and like this; the person falls in the debt trap. It is so; if the person spends 30-40% of their take home salary in repaying the loan amount, it decreases the spending capacity of the person and it impacts the person’s living standard. The person is left with little money to save, after meeting his obligations and in case of emergency; the person again has to take debt, and this vicious circle goes on and exploits the person financial position.

The person should always keep in mind; while going for the personal loan that the personal loan attracts interest rate around 14-25% depending upon customer’s profile. The person has to pay such a high interest, as personal loan is an unsecured personal loan, and even tenure of the loan is also shorter, i.e. 1-5years and even loan amount are also too low that even sometimes person has to arrange money from other means.