A personal loan is a very popular credit product that has taken care of millions of people over the years. It has been a saviour for many people in cases of sudden expenses and even emergencies. Personal loans by many people are commonly used to fund wedding expenses, travel expenses, etc. On the other hand, some people use it to consolidate their debt. This means that you can avail yourself of a personal loan and clear off the other loans to reduce the monthly liability by consolidating them all under one EMI. You best check out the debt consolidation personal loans.
What is Debt Consolidation?
Debt consolidation is a financial strategy used to solve the issue of repayments of already existing debt. These debts can include personal loans, credit card outstanding bills, and vehicle loans. With the help of debt consolidation, one can combine all the existing debts into a single loan. This helps to save on the varying interest demanded by different loans or lenders. As you opt for debt consolidation with a personal loan, you need to take action on a couple of habits that may have got you in this situation in the first place such as high dependency on credit cards or unnecessary spending habits.
Why you should opt for Personal Loan Consolidation
You can save a lot of interest expense by bringing multiple debts under one loan if you do it wisely. There are a few appealing reasons why you should consider debt consolidation.
It is quite possible that your new interest rate may be lower than the interest rate you’ve been already paying. In such a situation, debt consolidation might look good for you. Make sure to do a proper study of the difference in the rate of interest and your monthly payment between the new loan and your existing liabilities.
Keeping track of multiple EMIs can be hectic. If you miss even one of your EMIs, you might be penalized, and that will harm your credit (CRISIL) score. Such a nuisance can be avoided by consolidating the multiple debts into one. This will make your EMI payment much more convenient and stress-free.
Fixed Repayment Tenure
Personal loans are usually availed for a period of 1 to 5 years and you just have to make timely payments throughout your tenure. Getting into the practice of paying your EMIs on time and managing your other financial expenses as well will help you plan your finances better once you’ve paid off the debt.
Features of Debt Consolidation for Personal Loan
The key features of personal loan for debt consolidation are as follows:
- Online Application
- No collateral
- Timely Approval
- Quick Disbursal
Effect of Debt Consolidation on your Credit Score?
Managing multiple debts and paying off several EMIs is stressful. You miss one due date and you end up paying a penalty which is going to add to your burden and also affect your credit report and subsequently your credit score. You can avoid all the hassle by consolidating your existing debt to a personal loan. Now you make just one EMI each month for all your debt which is going to be much more convenient than before and you won’t even have to worry about missing a payment. You just have to make sure that you make timely payments of EMI and that won’t affect your credit score negatively.
There are several banks and financial institutions that offer personal loans for debt consolidation. They charge a reasonable rate of interest and offer flexible terms so you can repay the borrowed amount easily. Make sure to check your loan eligibility and credit score before you apply for a loan and make timely payments if you are eligible.