Expenses hit you when you least expect them. For instance, an increase in your child’s college fees, a family member requiring sudden hospitalisation, or a deposit for your home rent are sudden expenses that may not allow time for planning. You can learn more about the meaning of Consolidation Loans and apply for them. Impulse spending could include buying the latest gadgets, a family holiday, or a new house or car.
While using multiple Credit Cards has its benefits, reckless use could trap you in a debt trap. The inability to pay your dues attracts a high interest rate. Debt consolidation is worthwhile if you bear an excessive debt burden and high interest costs.
What does debt consolidation mean?
Debt consolidation refers to decreasing the number of Loan accounts to help you save hard-earned money from high-interest outgoings and repay debts sooner. Plan them so that the Loans bearing a high interest cost are repaid with a fresh one offered at a lower interest cost and the best terms.
How do Personal Loans help?
Suppose you have outstanding dues on multiple Credit Cards attracting a very high interest, plus an existing high-interest Personal Loan. In that case, consolidating all the debts into one Personal Loan makes sense. To do so, apply for a fresh Personal Loan from a bank which offers a lower interest rate. Use it to repay the Credit Card dues and other high-interest cost Loans.
Ensure the new Loan has beneficial features such as flexible repayment tenure, zero prepayment, and zero foreclosure charges. If you plan your expenses wisely, you can invest the money which you save on the interest outgo to earn higher returns. It will make life easy for you. You can use the Personal Loan EMI calculator to calculate your principal and interest outgo. It lets you know how much equated monthly instalment you need to pay with interest.
Key benefits of debt consolidation
Now that you have understood the meaning of Consolidation Loans let us discuss their key benefits. They simplify the repayment process, with only one or two Loan Account EMIs to handle. Your debt burden reduces, as the interest borne on the Loan is optimally reduced, easing your commitments. You can repay the Personal Loan sooner and become debt-free, ending nagging repayment reminders and boosting your credit scores.
To get quick approval, maintain a credit score of 750 and above, avoid multiple applications, ensure your EMIs do not exceed 40% of your net salary, and maintain a fair balance between secured and unsecured Loans.
Conclusion
A low-interest Personal Loan for debt consolidation is worthwhile instead of utilising your existing investments assigned for other financial goals, such as children’s further education and retirement. With time and monetary discipline, you can repay your dues. Being calculative about your investments and finances ensures awareness and keeps you updated with your expenses, income, and the amount you have as idle funds.
