Consolidate Your Debt With Personal Loan

Debt consolidation means combining a borrower several loans into a new loan. Read to know about benefit of debt consolidation.

7 Nov,2022 05:25 IST 3 views
Consolidate Your Debt With Personal Loan

A large loan can put any person under strain. The strain is further increased if one is required to repay many loans. Since handling many financial obligations is challenging, combining all debts into one loan might simplify things.

A personal loan is a simple finance solution that can be used to handle such a circumstance. This is due to the fact that there are no restrictions on how the borrower utilises the money because the lenders are not concerned about it. A personal loan can be used to start a business, cover wedding or holiday expenses, and consolidate all debts.

What Is Debt Consolidation?

In essence, debt consolidation entails consolidating a borrower’s many loans into a single, new loan. To pay off many debts, the debt consolidation process entails obtaining a new loan with better terms. These terms could include lower interest rates and a change in tenor.

Why Debt Consolidation?

Personal loans make it possible to combine multiple loans and other commitments into one easy-to-manage loan. Here are a few reasons why personal loans are useful for debt consolidation:

Single Tenor:

Managing several loans with different payback periods could be difficult for borrowers. If a debt has a single loan and a set period, repaying it is easier since the borrower doesn’t have to keep track of different timelines.

Quick Approval:

The application process for personal loans is quick and easy, especially if it is done online. Only a few financial statements and know-your-customer documentation are needed by lenders for verification. Borrowers who apply for loans online must upload the scanned copies of their supporting documentation to the lender’s portal.

No-Collateral Loans:

The applicant is not required to put up any of his or her assets as collateral in the case of personal loan. This is advantageous for borrowers without any real estate or gold or other assets.

Common Interest Rate:

A big advantage of debt consolidation is that borrowers can get lower interest rates on the new loans than the rates they might be paying on the different loans and paying interest separately on each one.

Improving Credit Score:

Consolidating the prior loans into a single one may initially have a negative effect on the credit score as the overall amount of credit available declines. However, over time, credit scores can be improved by making prompt EMI payments as well as repaying debts related to new loans.

Conclusion

While personal loans are mostly taken to meet immediate personal expenditures, borrowers can also use these loans to consolidate multiple existing loans into a single debt account.

A large number of banks and non-banking finance companies offer personal loans. But since the primary reason for debt consolidation is to simplify our financial lives, borrowers should prefer a lender that makes it easier to take out a new loan without any hassles.

A debt consolidation loan is the perfect choice if a borrower finds it challenging to keep track of numerous loans, varied interest rates, and repayment schedules. Consolidating many loans into a single loan will streamline repayments, reduce interest costs, and make default prevention easier.

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