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How debt consolidation helps manage your finances better

  • Highlights

  • Consolidation packs all your debts into one loan

  • You can get this loan with low interest and long tenor

  • Consolidating debts improves your credit score

  • It allows you to clear debts and focus on savings

Consolidating debts increases financial efficiency. Rather than allowing your debts to increase over time, you can take stock of all your dues and consolidate them with a single loan. This reduces your monthly financial burden and helps you manage your loan better. This is just the first of many benefits that debt consolidation offers. Here is a closer look at some ways in which it helps you manage your finances better.

Offers a low interest rate loan

Let’s assume you have several pending dues including credit card debts and other term loans, which you have taken at different points of time. Now, over the years, these big and small debts have amassed to a sizeable amount. This puts a burden on your finances, as every month you are diverting a significant part of your income towards repaying these debts. Consolidate these loans and bring them under the umbrella of a single loan. This enables you to pay them off quickly and makes managing the debt easier.

You can get access to a larger loan by taking a loan against property. Pledging a property will also give you access to a loan with a lower interest rate.

Lowers your monthly expenses towards the loan

Debt consolidation wraps up all your debts and dues under one loan. This not only simplifies matters since youonly have to pay one EMI every month, but also lowers the EMI amount considerably. Let’s assume that you arepaying Rs.5,000 for each loan, each month. If you have 4 loans, you willpay Rs.20,000 as EMIs, while the principals cumulatively add up to over Rs.10 lakh. Now, once you pay off the debts using the loan against property, you will have only one loan to clear off, whose monthly EMI will be less than Rs.20,000, especially if you choose a long tenor of up to 20 years.

Additional Read: 3 ways to ensure that you don’t default on your loan against property

Improves your CIBIL score

Too many ongoing loans and pending debts reflect poorly on your credit score and bring it down. When you pay it off using one loan, your credit score will instantly improve. Moreover, as you repay your debt consolidation loan, this score will improve further. If you choose a debt consolidation loan with flexible prepayment terms, you can use this feature to further boost your CIBIL score.

Top things you need to know before applying for a loan against property

Allows you to increase your savings

Paying one consolidated EMI eases your financial burden and gives you a chance to get out of your debts faster. Besides, since you’re only making a single, affordable EMI payment each month, you canfocus on increasing your savings, which you can use for a range of purposes, including making prepayments towards your consolidated loan’s principal. By undertaking a few measures such as availing a loan against property, you can start consolidating your debts, clear them quicker and re-focus your attention on smart savings and investments.

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