Personal Loans for Debt Consolidation: Everything You Need to Know
You can combine two or more unsecured or secured debts into a fresh personal loan through debt consolidation. This facility lets you avoid tracking and paying EMIs for all your existing loans separately. In fact, by paying a single instalment towards the new personal loan, you will be able to meet all your debt liabilities.
Keep reading to know about how you can benefit from personal loan debt consolidation.
Features and Benefits of Personal Loan for Debt Consolidation:
The features and benefits are as follows:
● Collateral-free: You do not need to mortgage any property to obtain a fresh personal loan for consolidating existing debts.
● Repayment Flexibility: You can choose the loan repayment time between 1 to 5 years, considering your repayment potential.
● On-time Approval: The seamless online application and lenient documentation procedures let you get approval on this credit facility without much delay.
● Instant Disbursal: The loan amount is disbursed without delay after you get approval.
● Prepayment Option Available: Several financial institutions offer loan prepayment facilities. It helps you eliminate the debt obligation before time, saving much of your interest outgo.
● Online Application Facility: You can easily apply for this loan online from the comfort of your home.
Advantages of Choosing Personal Loan for Debt Consolidation:
The advantages of choosing a personal loan for debt consolidation are as follows:
● Lower Interest Rate: Business loans and debts obtained from credit cards come at a higher rate than a personal loan. By combining them into a personal loan, you can reduce the applicable interest and save much of your overall borrowing costs.
● Single EMI for All Loans: You do not need to pay EMIs separately for all the loans. Instead, you can pay only a single EMI, which is easy to keep track of and manage.
● Single Loan Repayment Tenure: Single loan repayment tenure makes it easy to plan the repayment and close all the loans together.
Factors to Consider Before Opting for a Personal Loan for Debt Consolidation:
You must consider the following factors before applying for debt consolidation:
● Check Your Credit Score
Credit score leaves a prominent impact on the interest rate charged by a debt consolidating financial company. So, you need to make an effort to opt for debt consolidation when you have a healthy credit score. If your CIBIL score is below 750, you need to inform all your income sources to financial institutions. Alternatively, you can apply with a co-borrower with a CIBIL score above 750. These will help you get the debt consolidation facility easily.
● Consider Repayment Tenure of Existing Debt
Before opting for debt consolidation, check the repayment tenure of the existing loans. If the tenure of a present debt is about to end and you feel that you can repay your loan on time, there is no need to go for debt consolidation.
● Go Through Eligibility Criteria Set by Financial Institutions
Eligibility criteria vary considerably from one lender to another. So it is a must to check if you fulfil all the eligibility standards they have set to qualify for debt consolidation.
● Compare Interest Rate and Additional Charges
Before deciding on a financial institution for debt consolidation, you need to compare interest rates offered by different financial institutions. At the same time, you must also consider the additional charges lenders levy, such as processing fees, stamp duty, etc. This will help you minimize your borrowing cost.
● Loan repayment Tenure after Debt Consolidation
You also need to ensure that financial institutions offer enough time to repay your consolidating personal loan. In a shorter tenure, the instalment amount will be higher, making it stressful for you to repay. You can use a personal loan calculator to know whether the repayment period gives you a manageable EMI. Only by mentioning the interest rate, loan amount and tenure you can determine the EMIs.
Personal Loan for Debt consolidation v/s Balance Transfer
Choosing between debt consolidation and balance transfer is a tough task when it comes to making a solution for loan repayment. Both have their advantages and are effective for different scenarios. You can go for a balance transfer when you have taken a single loan at a higher interest rate.
On the other hand, if you have applied for multiple loans, you can go for debt consolidation, so that you can make single EMI payment. It will become easier to track repayment status. Hence, it would be best to choose the most appropriate option after ensuring that it benefits you the most.
Now that you have a complete idea of the benefits of a personal loan for debt consolidation, you must evaluate your situation and apply for the financial facility if needed. However, before opting for it, compare the interest rates and loan tenure offered by different financial institutions to get the best deals.