Why Consolidate your Debts?
- To clear your credit card bills or settle any of your existing debts.
- Reduce stress and gain financial stability.
- Lower the burden of paying high-interest rates on your various loans.
- Ends your debt burden faster.
- Merge your multiple EMIs to a single EMI which makes it convenient for you.
- Can save much of your money.
While credit cards and several other loans are a great way to fulfil our financial needs, make instant purchases and help us in emergencies when we are short on cash, but you cannot ignore the fact that when these loans are not managed properly can easily get us trapped in debt. This further ends up with negative impacts on our finances and even causes a different level of stress. To avoid such issues it is always suggested to borrow as per your need keeping in mind your repayment capacity. However, if you are already facing such a situation transferring all your debts with high-interest rates to a low rate of interest can simplify your finances by reducing your payable monthly EMI.
What is a Debt Consolidation Loan?
A debt consolidation loan is a type of unsecured personal loan, where you get money to pay off your existing obligation such as your credit card bill, a personal loan which is on a higher rate of interest, any two-wheeler loan, student loan, etc. A debt consolidation loan does not require any collateral or security and is available at affordable pricing.
Having multiple loans at the same time can be a headache for many of us as paying multiple EMIs may cost much individually. A debt consolidation loan combines all the loans and thus you end up paying only one EMI.
What is the interest rate for a debt consolidation loan?
As said above, debt consolidation loans are a type of personal loan only, hence the interest rate of debt consolidation loans is mostly equivalent to the personal loan which as of now starts @ 10.5% p.a and can go up to 16%p. a depending upon the borrower’s eligibility and profile.
How Debt Consolidation Loan works?
Once you apply for a debt consolidation loan, lenders check for your eligibility and credit the loan amount directly on your bank account once you meet their requirements. With this money, you can now close all your existing debts which were costing you a higher rate of interest.
This way all your loans will be closed and you will be left with a single loan which you just availed. Doing this will help you save more on interest and you will be paying only one EMI. Another advantage of going with a debt consolidation loan is – your loans may end sooner and you can thus enjoy a worry-free life.
Why does it make sense to consolidate your debt with a personal loan?
You don’t need to offer any collateral
These loans are unsecured and you do not need to pledge any of your assets as collateral to get the loan. However, you need a strong credit history and a low debt to income ratio to get it approved for.
Reduce the interest rate on your outstanding dues
Few of your borrowings such as your credit card or a personal loan availed at a higher rate of interest can cost you much in a long run. The cumulative effect can cause your debts to soar. For some, there can also be a time when you are struggling to repay your debts. Taking a personal loan at a lower rate of interest for debt consolidation can help you to close all your higher interest rate loans with which you are struggling and can save you a lot of money.
Can get a longer tenure to lower your monthly payable EMI
For a debt consolidation loan, the repayment tenure mostly ranges from 1 to 5 years. So, if you think any of your loans are costing you more and you don’t have the option to restructure them then in that case you can go for a debt consolidation loan. This will help you get a longer tenure for your new loan which will further result in lowering your monthly EMIs. Making it affordable for you.
Getting a new loan to merge all your existing loans can reduce your debt burden. This is very helpful when you don’t have the option to restructure your loan. Availing a debt consolidation loan not only reduces your monthly payable EMI or saves your money but it can also help you to end your debt faster so that you can live stress-free lives along with financial freedom. Hence, if you have multiple debts then you should definitely apply for a debt consolidation loan.