Credit from loans, EMIs and credit cards can help you in many ways. It can enable you to make important purchases that you cannot currently afford with your income and savings. While bringing convenience to the borrower, such loans can sometimes get overwhelming for various reasons. Even if you are able to repay the loans on time, multiple lines of credit means that you will have various things to keep track of, such as repayment dates, interest rates, payment amounts, etc.
In such scenarios, instead of being burdened with debt, or having to juggle all minute details, one can pay off multiple open loans using a single personal loan. And then, one can pay the personal loan off in the form of monthly installments with low interest rates. This is known as debt consolidation.
Reasons to choose a personal loan for debt consolidation:
- Low interest rates:
Interest charged for credit card usage is usually higher than that of personal loans. Rather than having to pay interest for multiple credit cards, you can simply make one loan payment every month.
- Track repayments well:
While repaying multiple loans, the details can be difficult to remember and track. This can also lead to missed payments. With single monthly payments, it is easier to pay and difficult to miss.
- Improve your credit score:
One benefits from faster pay-offs and foreclosure of loans as they increase one’s credit scores. A robust credit score helps you meet eligibility criteria for bigger loans and other credit in the future.
In order to take a personal loan for debt consolidation, you will have to sign a debt agreement. It is a contract between the borrower and the lender of a financial instrument- in this case, the personal loan. This agreement states that the amount borrowed in the consolidation loan is for repayment of existing debt only. The agreement often binds one to pay the debts back without delays. Any delay in repayment or breach of the agreement may result in fines or penalties.
A personal loan for debt consolidation can save you from the hassle of having to keep track of multiple payment dates, amounts and other details. It can also protect your credit score, by letting you clear your debt before the designated lending time. Whether or not one should opt for a consolidation loan depends on the personal financial situation of the borrowing individual as well as the term for which the personal loan is being drawn for, the amount of total interest paid over a very long-term may stack up. For short-term relief, debt consolidation with a personal loan may become a convenient solution. Your loan repayment process by figuring out your ideal personal loan EMI amount beforehand. This can be done with a simple personal loan EMI calculator which is an easy-to-use digital tool that can be easily found online.
