Too Many Loans? Debt Consolidation Loan Can Be a Solution
When life throws too many problems at a time, it becomes difficult to solve all of them. Wouldn’t it be a relief if all the problems are combined into one?
If you are laden with more than one debt and it is hard to manage them at once, there is a way to consolidate and pay them off effortlessly. This is called debt consolidation loan. Read through to know how debt consolidation loan works and how can you benefit from it.
Debt Consolidation Loan
Debt consolidation loan is a process of taking a new single loan to pay off your several existing loans. This is very helpful especially when you are unable to manage several loans with regard to repayments, interest rate, and delinquency.
Your multiple loans such as student loan, personal loan, credit card bills etc. with different lenders can be consolidated through this loan. Instead of paying 5 or 6 times, you are giving out the same amount in a single payment.
How Does Debt Consolidation Loan Work?
You can consolidate your loans through a secured loan or an unsecured loan. In a secured consolidation loan, you get the low-interest rate as your pledge your assets to get a loan. Loan against property, car, equity, gold, insurance policy etc. are some of the options you take a secured debt consolidation loan. Your collateral will be at risk if you are unable to make proper repayments.
The interest rate on unsecured debt consolidation loan is generally higher than secured loans. As this is a collateral free loan, you don’t put your property at risk. Peer 2 peer lending is a viable option for getting immediate unsecured debt consolidation loan.
How to Apply for Debt Consolidation Loan?
Most of the private financial institutions, NBFCs and some major banks provide debt consolidation loan. you can either apply online or visit your nearby branch. You need to have all the KYC documents for a successful approval. The interest rate depends on your creditworthiness.
Advantages of Debt Consolidation Loan
· Efficient way to manage your loans under a single payment method
· Possibility of reduction in interest rate based on your creditworthiness
· With a long-term EMI, your debt burden is reduced.
· No multiple charges
· Saves your time from paying multiple loans
· Credit score soars with consistent repayment
Disadvantages of Debt Consolidation Loan
· Your collateral is put at risk in secured debt consolidation loan
· Without a steady income, debt consolidation loan becomes an additional burden
· Credit score takes a hit if not repaid regularly
Is Debt Consolidation Loan the Right Choice to Ease Your Loan Burden?
Whether a single loan or multiple loans, it is your responsibility to repay them. Debt consolidation loan does not literally lower your financial burden but rather simplifies the repaying process. If you have a bad credit and apply for a debt consolidation loan, there are chances your rate of interest will increase on consolidation. This loan is for you if you want to reform your spending habits and manage your finance efficiently.