Debt Consolidation Loan

Debt consolidation is when an you obtains a fresh loan to repay existing debts and liabilities. Generally, multiple small debts are combined into one loan with more favourable repayment terms such as lower interest rates and affordable EMIs. It simplifies the repayment process and allows you to keep a tab on your overall debts efficiently.

Typically, there are two types of debt consolidation loans - secured and unsecured loan. An unsecured personal loan for debt consolidation is considered one of the most effective ways to mitigate the burden of student loans, credit card debts, and other significant liabilities.

In debt consolidation, you avail of a new loan of substantial value to repay all existing debts. Subsequently, you have to make a single monthly payment to account for this newly availed loan.

Usually, such loans ensure lesser interest outgo compared to the total interest expenses incurred for all the existing debts accumulated together. It is considered an effective and more straightforward method of lowering the burden of multiple loans. Above all, this process allows you to pay off loans in a more streamlined manner since you only have to worry about one due date each month.

You can easily consolidate your debts to avail personal loan at lower interest rate on personal loan and for a longer tenor. Suppose you have two credit cards and each has a debt of Rs.60,000 and Rs.32,000, respectively.

You also have a student loan of Rs.1.5 lakh that you must repay within the next 2 years. To repay the entire debt, i.e., Rs.2,42,000, you decide to consolidate the credit card and student loan with a personal loan. To streamline the repayment process, you can opt for a loan with a low interest rate and a longer tenor.

Yes, credit cardholders can avail a personal loan to consolidate your dues. In fact, consolidating card dues with a personal loan is among the most effective ways of streamlining payments at a lower cost. Interest rates applicable on personal loans is relatively lower than that of credit card dues. This means credit cardholders can save considerably since you won’t have to service late payment fines. Furthermore, such a method allows you to pick a flexible tenor and suitable EMI to facilitate easier repayments. Also, by paying personal loan EMIs on time, you can improve your current CIBIL score and improve your credibility significantly.