Picture of the author

Personal Loan For Debt Consolidation

Debts can severely affect your financial strength and prevent you from saving money for future goals. To bypass such complications, you can consider consolidating your debt using a personal loan.

In this regard, you can consider applying for a debt consolidation loan on Credmudra and reduce your financial burden considerably.

What is debt consolidation loan

Debt Consolidation Loan: An Overview

The method of opting for a single loan to close several ongoing debts is known as debt consolidation. Consolidating multiple debts will help you save considerable money that you would otherwise pay in the form of interest. Moreover, opting for debt consolidation will allow you to manage your finances in a better way.

Features And Benefits Of Debt Consolidation Loan

Here are the features and benefits that make debt consolidation loans a viable option to manage finances:

Seamless loan approval

If you apply for a personal loan to consolidate your ongoing debts, chances are, the lender may process your loan application in just a few hours. After you make an application, the lending partner will review your application, check your credit score and verify your documents. You will receive the loan amount within the shortest waiting time if your loan application passes all the criteria set by the lender.

Unlike other secured credit facilities, you will not have to keep your assets as collateral in order to opt for a personal loan for debt consolidation purposes. You will be able to get the required sum using your CIBIL score.

Choosing the repayment term is one of the biggest advantages of opting for a personal loan for debt consolidation. You can select loan repayment tenure between 3 months to 2 years per your financial strength.

Benefits Of Debt Consolidation Loan

Eligibility Criteria For Debt Consolidation Loan

Although the eligibility criteria for a debt consolidation loan can vary from lender to lender, here are some basic parameters that an applicant must meet to get the required funds:

  • Nationality: Indian

  • Employment: Both salaried and self-employed individuals

  • CIBIL Score: Minimum 685

  • Monthly Income: More than Rs.25,000 per month

Documents Required To Apply For A Debt Consolidation Loan

Here are the documents you will need to submit during the personal loan application process:

  • Identity Proof: Voter ID Card, Passport, Driving License, Aadhaar Card, PAN Card, etc.

  • Residential Proof:Voter ID Card, Utility Bills (Electricity and Water Bill), etc.

  • Income Proof:Salary Slip (for salaried individuals), Audited financial record (for self-employed individuals), bank account statement.

Step-By-Step Process To Apply For Debt consolidation Loan

Here is the stepwise process you need to follow to apply for a Debt Consolidation loan online through Credmudra:

Will Consolidating Debts With A Personal Loan Affect Your CIBIL Score?

If you consolidate your ongoing debt into a new loan, the low-interest credit can hurt your CIBIL score in the short term.

Nevertheless, if you continue making regular payments toward your debt consolidation loan, you can improve your CIBIL score fast and build a decent score that will help you get quick loan approvals in the long run. Timely EMI payments will help you maintain an excellent credit history.

Things To Consider When Choosing Debt Consolidation loan

Top 3 Things to Consider When Choosing a Personal Loan for Debt Consolidation

Though a debt consolidation loan can help reduce your financial burden, willing applicants must always be careful with such financial decisions. Simple misses can negatively affect your finances.

Here are some pointers to take note of:

Never opt for a loan without thorough market research

If you do not research or plan your debt consolidation loan properly before applying, it can negatively affect your finances. This instance can be truer if you are someone who cannot manage finances properly. Therefore, to avoid such complications and reap the maximum benefits of a debt consolidation loan, it is best to make a repayment plan before applying for credit.

Most people apply for a personal loan for debt consolidation to save some money that they would otherwise have to spend on repaying multiple other debts. However, if you do not research properly and compare all the credit options, debt consolidation might not serve the purpose of building your savings.

A debt consolidation loan helps you to close ongoing loans. This means you may have to pay some pre-closure charges to the existing lender. These fees add up the total expenses. Hence, you must enquire with your existing lender about these pre-closure charges and then apply for a new debt consolidation loan.

Hence, you must enquire with your existing lender about these pre-closure charges and then apply for a new debt consolidation loan.

Know The Right Way To Use A Debt Consolidation

Once you apply for a debt consolidation loan, you must ensure the existing debt does not come back after you have paid them off. The best way to avoid this circumstance is by not opting for any credit while you are repaying the existing debts. This is because fresh debts during this period will increase your financial burden, making it hard for you to tackle the debt load.

For instance, if you have accumulated debt from your credit card, it is best to stop using the credit card completely. You can use a debit card to manage your finances. Even after repaying the existing debts, make it a thumb rule to only use a credit card for emergency situations.

Further, once you have paid off all the existing debts, inculcate some healthy money habits that will save you from debt burden in the future. Budgeting is an effective way to better financial management. By making a proper budget, you can evaluate every expense and organize your payments and bills throughout the month.

Debt Consolidation Vs. Balance Transfer - Which Is Your Safest Bet?

Although both methods are effective in debt management, you must consider all the features of these credit facilities before opting for one.

Here are a few points you should take into account:

Evaluate the monetary benefit

Whether you are opting for a balance transfer or a debt consolidation, you must calculate the monetary benefits that you can achieve. The best way to evaluate this is by weighing the amount of money you will save by opting for either of these options. Based on this calculation, choose the facility that has a more saving scope.

Even if the interest rates are low, you must take into account several additional costs, such as processing charges for a balance transfer or debt consolidation loan, foreclosure charges, documentation charges, etc. Consider these charges as they add to the total costs involved and make an informed decision accordingly.

Both balance transfer credits and debt consolidation loans are new loans. The terms and conditions for both will be fresh yet different. You must read all the points in the terms and conditions carefully to avoid unnecessary hassles in the long run.

With all this information in hand, we hope you can make an informed decision on whether to apply for a debt consolidation loan to reduce your financial burden.

With Credmudra, you can get the required funds directly into your bank account within the shortest waiting period.

Debt Consolidation Vs. Balance Transfer

FAQs About Personal Loan For Debt Consolidation

1. Is balance transfer better than debt consolidation?

Both of these debt management facilities have their own pros and cons. You must take into account all these factors while choosing the suitable option. Your primary motive must be to select a facility that will reduce your debt load while helping you save a considerable sum of money.

While consolidating your existing debts, you should try to avoid the following types of credits:

  • Loans with a high interest rate
  • Loans with high additional charges
  • Home equity loans
  • 401(k) loans

Yes. With Credmudra, you can select your loan repayment tenure, i.e., from three months to two years. The flexibility of repayment is a primary reason that makes us one of the best short-term loan aggregators in the market.

Credmudra

4.9

Rated by our customer

Follow Us On-

Our Company

  • About Us
  • Terms and Condition
  • Privacy Policy
  • Data Storage Policy
  • Experian Terms & Conditions
  • Our Lendinng Partners
  • Blog
  • Careers

Contact With Us

Mumbai Location:
912 Sureshwari Techno It Park Premises Village Eksar, Link Road Borivli (w) Mumbai, 400092

Bhopal Location:
B No. 8 Nirupam, Ph-ii, Nirupam Estate, Ahmedpur Kalan, Huzur, Bhopal, Madhya Pradesh, India, 462026

Contact Email:
[email protected]

Startupindia

Join Our Newsletter

Thank You For Subscribe us

* Will send you weekly updates for your better finance management.

Copyright @ Credmudra 2024. All Rights Reserved.