How a Personal Loan Can Help in Debt Consolidation

What is a consolidation loan? Is it a good idea to take consolidation loans?  Personal loans are often used to cover the cost of significant life events such as marriages, higher education, and vacations. But sometimes high interest loans can make it hard to repay the loan. If you have multiple such loans, then it can take a toll on your finances. In such a situation, going for a consolidation loan is a good idea.

Why should you get a debt consolidation loan?

Having a lot of debts might be unpleasant in certain instances. If you can get away from them, you can find some peace. People seldom feel overwhelmed by their job and family duties when they have to keep track of many payments at once. One of the basic benefits of debt consolidation is adding your gains into a single charge.

When you get a consolidation loan to repay debt, the new loan amount pays off all previous loans. After you’ve paid off your other loans, you’ll have one loan and one EMI. As a result, you’ll have peace of mind knowing that you only have to deal with one monthly price.

In today’s society, a debt consolidation loan is a good strategy to better your financial status. Unsecured loans are useful in this situation. It offers two major benefits. The first is that it is easy to monitor a single EMI.

The second benefit is that the interest rates will fall. There are various free online EMI calculators for a debt consolidation loan that you can use. It may assist you in learning how much you would be required to pay on a personal loan.

Advantages

• If necessary, you may get a debt consolidation loan of up to Rs. 3 crores to assist you in repaying your loans.
• Personal loans from banks and NBFCs feature low-interest rates. This makes them an attractive option for those needing funds. Consolidation loans, for example, may have interest rates as low as 11.99%.
• Preparing documents is simple and easy.
• It is simple to apply. You may do it online and submit any other resources there as well.
• A debt consolidation loan may be granted in as little as 30 minutes, with funds in your account within 72 hours.

Requirements for a debt consolidation loan

• Proof of age.
• Photo ID (Voter ID, Driver’s licence, PAN Card).
• Passport-size picture.
• Residence Proof (ration card, telephone bill, rental agreement, passport copy etc.)
• Bank statement for six months.
• Form 16, tax returns, and three recent pay stubs.
• Self-employed applicants must provide three years’ tax returns with a verified balance sheet, and a profit-and-loss statement.
• Depending on the kind of loan sought, additional documentation may be required.

All possible options of debt consolidation loan

If a personal loan to pay off various debts isn’t an option, there are a few additional options.

A home equity credit line

You must own your own house and owe less on your mortgage than the property is worth to qualify for a home equity loan. You may use the funds from this loan for whatever, including paying off other debts with debt consolidation loan.

All home equity loans require the use of your house as collateral. This makes the loan seem less troublesome to the lender. Therefore interest rates usually are lower than for loans that aren’t backed by anything, such as debt consolidation loan. However, you may retain your house if you repay your home equity loan or get behind on your payments. Calculate your home’s equity to discover whether you can acquire a large loan to cover your costs.

Transferring a credit card debt from one card to another

If you’re having problems paying off several credit card accounts, consider debt transfer credit cards. The introductory APR on many credit cards is 0% for a certain period, generally between 12 and 21 months.

It’s a good idea to use this strategy to pay off all your credit card bills with a single monthly payment. Keep in mind that if you have a large credit card debt, you may need help getting a balance transfer for the amount you want to transfer. As a result, you can pay off the debt accumulated on your new card and any previous cards where you couldn’t share the amount. A debt consolidation loan is also a good option.

Debt snowball effect.

The goal is to prioritise the smaller debts at the top of the list. You pay the minimum on your other obligations, but any additional money goes toward the loan with the least amount. Once you’ve paid off that sum with debt consolidation loan, you should apply any remaining funds to the next lowest one. Continue doing so until all of your bills are paid off. One advantage is that you will immediately see effects. However, if you incur more debt with higher interest rates, you may pay more interest altogether.

A foreboding debt cascade.

The debt with the highest interest rate gets paid off first in the first phase of this strategy. Pay the bare minimum on all of your other bills and then spend every additional penny toward paying off the loan with the highest interest rate with consolidation loans. If the interest rate on this loan is lower than the interest rate on your following highest interest obligation, pay it off first. Continue doing so until all of your bills are paid off. You may save more money in the long term if you pay off the debts with the highest interest rates first, but you may come closer to financial independence later than if you employed the debt snowball strategy.

Conclusion

Consolidation loans are simple to get, inexpensive, and offer low-interest rates. You need a fast personal loan and three days to pay your bills. Visit Piramal Finance to acquire the best debt consolidation loans available. You can learn how to apply for a personal loan. Don’t hesitate to contact the team via phone or email if you have any more queries.