Question

When people are unable to repay a loan, they take another loan to repay the orignal loan. This vicious cycle is known as ___________.

• A. poverty
• B. loan cycle
• C. debt trap
• D. debt cycle

Answer 1

The correct option is C debt trap

People who cannot repay their loans usually sell their lands, gold, or other valuables to repay the loans. However, in the absence of such valuables, people take another loan to repay the previous loan. They are then obliged to repay the new loan as well. Thus, these people get trapped in a vicious cycle known as a debt trap.