This study highlights the importance of Islamic financial literacy in preventing debt traps by promoting economic stability and ethical financial management. A conceptual approach was adopted to examine the relationship between Islamic financial literacy, debt management, and religiosity. Islamic financial literacy is defined as the knowledge and skills required to make sound financial decisions in accordance with Shariah principles. To establish this concept, the study conducted a comprehensive literature review and theoretical analysis. The development of Islamic financial literacy enables individuals to achieve financial well-being while adhering to ethical and religious values. One of the key aspects of Islamic financial literacy is understanding the operation of financial systems within the Shariah framework, particularly the prohibition of riba (interest), the importance of halal investments, and the promotion of ethical and responsible financial behavior. It also helps individuals distinguish between halal and haram financial practices according to Islamic teachings. In this regard, Islamic financial literacy programs emphasize personal accountability and prudent financial decision-making. Religiosity further strengthens the application of Shariah-compliant financial practices by encouraging morally responsible financial behavior and reducing excessive dependence on debt. The study advocates the integration of Islamic financial literacy and religiosity into educational and policy frameworks to enhance financial resilience and reduce the likelihood of debt-related problems. The findings also emphasize the need for engaging and supportive learning environments through the use of interactive methods such as games and visual aids. Overall, the study concludes that combining Islamic financial literacy with religiosity can address the root causes of debt traps, including non-compliant financing practices and poor debt management. Integrating these principles into education and policy initiatives can contribute significantly to sustainable financial well-being and ethical financial conduct.