Here’s an example of how your credit card dues and other loan payments can be clubbed together to reduce your monthly EMI and help you save money.
Let’s say you have an active credit card for your personal and business expenses, and over time the balance has reached Rs. 1 lakh with an annual interest rate of 20%. You also availed a business loan of Rs. 12 lakh 12% interest rate for a tenor of 1 year to fuel the needs of your business. Consolidating your credit card debt and your business with a personal loan of 11% interest can help you save more than 8% on your monthly interest.
Here is how debt consolidation helps you save money
1. It charges you lower interest
A personal loan charges you lower interest than what credit card companies charge on overdue bills. By consolidating your debt, you pay a fixed interest on a single loan that is lower than the interest you would have paid on multiple loans. This makes repayment of the loan in EMI more convenient. As seen in the example above, it also helps you save a significant amount of money on your EMI.
2. It erases the hassle of repaying multiple debts simultaneously
Multiple debts have varying rates of interest and repayment deadlines and may not be affordable for you to pay. By consolidating your debt, you have a single loan with a fixed interest and one repayment schedule to follow, which becomes easier to manage.
3. It lets you choose the tenor based on your ability to repay
Personal loans are highly flexible. You can select the repayment tenor, depending on your income. For example, borrowers who want to clear the loan faster could opt for a shorter tenor than borrowers who want to repay the loan slowly and comfortably. Usually, personal loan tenors range from 6 months to 96 months.
4. You can choose the Flexi facility
Personal loans offered by lenders like Bajaj Finserv bring you a unique offering called Flexi personal loans, which makes debt consolidation easier. A Flexi personal loan gives you access to an approved sum, from which you can borrow as much as you need and whenever you need it. You also pay interest only on the amount you borrow and not the entire amount extended to you. Further, your EMI comprises only the interest component, making monthly payments easier for you. You can pay off the principal at the end of the tenor.
If you need to manage multiple debts with high interest in a more affordable and organised manner, choose to consolidate your debt with a personal loan.
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