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.
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:
Collateral-free credit facility
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.
Flexible repayment terms
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.
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.
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:
Always compare different credit options
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.
Know the prepayment charges for maximum 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:
Know the costs involved
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.
Read all terms and conditions carefully
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.
FAQs About Personal Loan For Debt Consolidation
2. What should I avoid while consolidating debts?
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
3. Can I select tenure for repaying a personal loan for debt consolidation?
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.
