Consolidate Your Debt With A Personal Loan

Any person can feel a tremendous amount of debt pressure. And if one is burdened with the task of paying back several loans, the pressure is considerably greater. Even if managing various debt commitments is difficult, consolidating all of your debts into one loan can make things run more smoothly.

An easy funding option that may be applied to deal with such a situation is a personal loan. This is because there are no limitations on how to utilise the money because lenders are not worried about its intended use. It can be used to launch a business, pay for wedding costs, consolidate all debts, and even pay off various commitments.

To be eligible for a personal loan, especially if it is coming from a new lender, every prospective borrower must meet certain requirements. A good credit score might allow the borrower to negotiate for a greater loan amount and more favourable interest rates.

Debt Consolidation – Meaning

Debt consolidation essentially involves combining a borrower’s several loans into a new, single loan. The procedure of consolidating debt involves getting a new loan with better conditions to pay off several debts.

Debt Consolidation – Benefits

A personal loan makes it simple and convenient to combine a variety of loans and other obligations. To comprehend why personal loans are advantageous for debt consolidation, consider the following points:

Single Repayment Tenor:

Typically, lenders provide borrowers a flexible one- to five-year payback period. Nevertheless, handling multiple loans with various payback terms may be challenging for borrowers. Repaying a debt is simpler if it has a single loan and a fixed term.

Speedy Approval:

A personal loan’s approval and disbursement procedures are easy and rapid. The application procedure is straightforward. Lenders require only a few basic know-your-customer documents and financial statements for verification. In the case of online loan applications, borrowers must upload the scanned copies of the documents on the lender’s portal.

Collateral-Free Loans:

There is no requirement for the applicant to pledge any of his or her assets as collateral. This is beneficial for borrowers who lack any real property.

Affordable Interest Rates:

Personal loans already have attractive interest rates than certain other types of borrowings such as credit card debt. But a key benefit of debt consolidation is that it may be possible to obtain an even more more affordable interest rate with just one loan as opposed to taking out many loans and paying interest on each one separately.

Debt Consolidation – Impact On Credit Score

The initial impact of consolidating the previous loans into a new one could be detrimental to the credit score. Due to the decrease in the overall amount of credit available, it also results in a rise in the debt-to-credit utilisation ratio.

On the other hand, prompt EMI payments and paying off debts associated with the new loan help to raise credit scores over time.

Conclusion

Personal loans are often used to consolidate a large number of loans into a single debt account.

If a borrower finds it difficult to keep track of many loans, various interest rates, and payback schedules, a debt consolidation loan is the best option. Consolidating several existing loans into a single loan will simplify repayments, save interest expenses, and make it simpler to prevent defaults.

While almost all banks and non-banking finance companies offer personal loans, it would be better to choose a lender that makes it easier to avail a new loan through a hassle-free process. IIFL Finance, one of India’s top NBFCs, does just that. The company provides a fully online process to apply for a personal loan and grants approval within minutes. It offers loans that start from as little as Rs 5,000 to as high as Rs 5 lakh for a period that can stretch from three months to three-and-a-half years.