Monetary debt will drown you in hefty EMIs, mounting interest rates and several debt accounts from different lending instruments, such as credit cards, home loans, etc. You may end up looking for ways to pay off all your loans quickly and comfortably and may even go to the point of emptying all your savings for this end. There is a better choice, though.
It makes sense to ease the lending process because you have several lines of credit by rolling all high-interest liabilities into a single lower-interest loan. This method is known as consolidating debt. With multiple payment dates and minimum sums to be charged, multiple loans may become challenging to handle. It will negatively influence your credit score if you miss even a single payment. It helps to simplify the finances by taking a single Debt Consolidation Loan to amass ample funds to pay off current dues and then repaying the same line of credit.
Why does consolidating your debt with a personal loan make sense?
Following are the advantages of using a personal loan as a debt consolidation loan:
No need for collateral to be provided to obtain a sizable fund
Personal loans are unsecured loans in nature where you don’t have to keep your assets as collateral and then begin to lose sleep over your outstanding. If you have a good credit background, you can get a large amount adequate to repay your current dues without having to think about collateral.
Repay outstanding dues with reduced rate:
- Short-term advances, such as credit card dues often impose additional charges on outstanding sums. This can augment to make your debts skyrocket. If you are trying to repay the credit taken, the pressure is increased by the extra charges. The use of a personal loan with an economical rate of interest for debt restructuring helps in getting rid of large penalties and provides a cost-effective option for repaying dues. Debt restructuring helps you to lower both the interest rate and the monthly premium while quickly paying off the debt.
- As a general rule, personal loans interest rates are lower than other credit card companies. The amount you spend in interest will be significantly decreased when using a personal loan for debt restructuring.
- Personal loans incur simple interest and instead of paying fees of multiple credit cards, and it is much feasible to make one loan payment per month.
Improve credit scores
- Maxing out your credit cards negatively affects your credit utilisation rate. Credit use is an approximation of the amount of credit available that you need. In your credit utilisation, a personal loan is not taken into account. By debt restructuring with a single personal loan and making prompt repayments, you can improve your credit score and quickly reduce your utilisation rate.
- In short, consolidate your debts, comply with bills on time and boost your credit score. Personal loans are an easy way to increase the credit limit for the future if handled correctly.
Take advantage from a faster pay-off for debt
With one payment per month and a set interest rate, you can pay off your loan in a short period. There’s no fixed repayment period on most credit cards. You can never get rid of your debt by paying a minimum due amount per month if your amount is high. Personal loans typically have a loan term of three to five years, and you can schedule your loan pay-out and monthly payments.
Using a more extended period to lower the monthly burden
For personal loans, most financial institutions offer loan tenors of 1 to 5 years. Thus, by going for easy EMIs over a long duration, you are free to ease the pressure on your expenditure.
Some Additional Benefits
- To rescue yourself with enhanced financial independence from any economic imbalance and difficulty in your monthly budget management.
- By removing skipped or late fees, it guarantees that you are addressing all your debts. Ensures the timely payment of bills before due dates and avoid unnecessary penalties because of non-payment.
- Saving various costs such as processing fees, insurance cover charges and using the money to pay off your monthly EMIs.
- NBFCs offer Instant personal loans at favourable interest rates that can be used for debt restructuring. Use the loan to pay off several balances and then pay back the personal loan over a defined tenor in simple monthly payments.
Tips on using a loan on debt restructuring in the right manner
- To save yourself from further loans piling up due to miscalculation, carry out your monthly budget planning correctly.
- Do pay your EMIs before the due date and remain consistent until all the debt is paid off. By ensuring prompt payments, the idea is to track your spending and savings pattern closely.
- Don’t take an extra amount just because debt restructuring gives you a touch of financial independence.
- Opt into debt restructuring only if you are entirely confident that you can fulfil your monthly commitments.
- As a product of debt reduction and less tension, don’t engage in impulsive spending.
Conclusion: A debt consolidation loan will help you achieve your target, whether you are trying to lower your monthly cost or pay off debt quickly. A personal loan for debt consolidation will help you more easily eliminate your debt and bring you back on the right track.
There are high-interest rates on credit card debt, gold loans, car loans and other credits that can add up to a large amount of unpaid debt. A personal loan taken for debt restructuring is a safe way out for you. It streamlines your financial plans and lets you save on interest rates when you have a single due date to remember and only one EMI to repay.