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What is debt consolidation and how does it help?

  • Highlights

  • Debt consolidation is using one loan to pay off all dues

  • It allows youto pay one EMI instead of multiple EMIs

  • It gradually improves your credit score

  • It helps you manage your finances better

Debt consolidation refersto the process of repaying multipleunpaid duesor outstanding debts with a single loan. You can consolidate your dues by availing anew loan on affordable terms. By doing so, you can enjoy from a host of benefits, right from improving your credit score to making repayment more manageable. Here’s a closer look at how debt consolidation helps your financial planning.

Reduces the burden of paying multiple EMIs

When you consolidate your debt using one loan that covers your all debt, you only have to worry about making a single payment each month, as opposed to tracking the payment of multiple EMIs and meeting various deadlines. By selecting a high-value loan, such as a loan against property,you can borrow sums up to Rs.3.5 crore to consolidate your debt by pledging a property. Not only will you get access to a large amount to clear your debts, but you will also benefit from features such as a long repayment tenor and Flexi Loan facility.

Improves your credit score

Multiple loans, unpaid dues,and penalties bring down your credit score significantly. However, paying off your debts with a single loan will immediately erase the total pending amount and improve your credit score. In the long term, as you go on repaying the loan that you took to consolidate your debt, your credit score will improve further.

Reduces your monthly outflow

When you consolidate your debt, you club all outstanding loans and balances and repay them in one go. When you take a loan against property to do this, the long tenor ensures that your subsequent EMIs are low, as they are spread over a lengthy repayment period.Secondly, the interest charged on this secured loan is also nominal, which makes repayment more affordable. This will easethe financial pressure that you feel, give you a chance to get your finances back on track andallow you to save some extra money.
These are some of the benefits that you can gain from with debt consolidation. However, when you are planning to combine your debts, always ensure that the loan you choose features nominal EMIs, a flexible tenor, and convenient prepayment terms. This will ensure that the loan is ideal to consolidate your debts and will leave you in a better position than when you started.

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