🔴 Common Loan Trap Business Models in India

  1. Unregulated Digital Loan Apps

    • Instant loans with minimal documentation.

    • High interest rates (often 30–60% annually or more).

    • Harassment and public shaming tactics for recovery.

  2. Microfinance Overlapping Loans

    • Rural borrowers take loans from multiple MFIs.

    • Repay one loan by borrowing from another.

  3. Gold Loan Chains

    • Borrowers pledge gold repeatedly and fall into cycles due to short tenures and high charges.

  4. Buy Now Pay Later (BNPL) Abuse

    • Young consumers overspend via easy BNPL credit, then default.

  5. Kisan Credit Card (KCC) Misuse

    • Farmers end up overborrowing without proper planning or diversification of income.

  6. Small Traders & MSMEs

    • Often take daily/weekly loans from private lenders at 3–5% per month due to lack of banking access.

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