Personal loans are a sought after product due to their ability to fund various expenses. While for some it may be marriage expenses, others might need it for miscellaneous expenses such as fixing a car or repainting the garage. But a very useful feature of a personal loan is the ability to consolidate debts.
Debt has a sneaky way of snowballing. Personal loans that are taken for the purpose of debt consolidation combine the various balances/debts into one single amount that will have to be paid on a monthly basis. Listed below are a few reasons why you should consider consolidating your debts by taking a personal loan:
A few key features and benefits of personal loans, which can make them an ideal option to consolidate your debts, are as follows:
A few lenders that offer personal loans for debt consolidation are as follows:
Bajaj Finserv’s Personal Loan for Debt Consolidation allows prospective borrowers to apply for a loan amount of up to Rs.25 lakh. The lender also offers pre-approved offers to select customers and a flexible repayment plan.
You can avail a personal loan from HDFC Bank to consolidate your debts. You can borrow any amount between Rs.50,000 and Rs.40 lakh and repay it to the lender within 60 months.
You can avail a loan of up to Rs.30 lakh from Citibank to consolidate your credit card debts and loan balances. The lender has a speedy loan approval process and offers flexible tenures that will match your repayment capacity.
If you require funds to repay your debts and consolidate the various payments into one, you can borrow a personal loan from ICICI Bank.
Axis Bank is another leading lender that offers affordable personal loans that can be availed if you wish to consolidate your debts. You can borrow between Rs.50,000 and Rs.15 lakh, based on your requirements.
If you have multiple debts, tracking your EMI payments can become a hassle. If you happen to miss paying even one of the EMIs within the due date specified by your lender, you may have to pay a penal fee. Further, there is a chance that missing your EMI payment could also affect your CIBIL score and make it difficult for you to avail funds in the future.
To avoid such troubles, you should consider borrowing a personal loan and consolidating your debts with the borrowed loan amount. Doing this will make repayments significantly easier since you will only have to pay a single EMI on a monthly basis, thus reducing the chances of you missing EMI payments. Paying your monthly EMI as per the schedule specified by your lender will help you maintain a positive CIBIL score.
While borrowing a personal loan to consolidate your debts is a great idea if multiple repayments are becoming a hassle, here are a few things you take into consideration before borrowing a personal loan:
Repaying a large debt is certainly not an easy task. If you are in such a scenario, you have two options – balance transfer or personal loan debt consolidation. Either of these options may be the right choice for you based on the nature of your debt.
A balance transfer may work well for you if you have already borrowed a loan for which you pay a high interest rate. In this case, you can opt for a personal loan balance transfer to start saving on your EMI payments. Many banks and financial institutions offer personal loans for balance transfer at competitive interest rates.
Now, if you have multiple loans, credit card debts, and other repayments, you can also opt to borrow a new personal loan and consolidate your various debts. In this case, you will pay a single EMI over the course of the repayment term.
While both options may work for you, ensure that you carefully assess your financial needs, the nature of your existing debts, and your financial requirements before you arrive at a decision with regard to whether you should opt for a personal loan debt consolidation or balance transfer. Also, once you choose a suitable option, ensure that you create a repayment plan to pay off the borrowed loan amount within the loan tenure chosen by you.
In conclusion, there are a number of banks and financial institutions in the country that offer personal loans for debt consolidation. These lenders charge a reasonable rate of interest and offer flexible terms that can make it easy for you to repay the borrowed sum. Ensure that you check your personal loan eligibility and credit score before approaching a lender for a personal loan.
1. What is debt consolidation?
This is a facility that allows you to take a single loan to cover all the loans that you’re currently handling. Repaying more than one loan at a time can make life very difficult. It is hard to keep track of multiple EMIs and pay them all in time. This facility pays off all these loans on your behalf so that you have only one loan to repay. In other words, it consolidates all your existing loans into a single loan.
2. What do I need to apply for a debt consolidation loan?
If you want to apply for this kind of a loan, you need to do the following:
3. Is it safe to take a consolidation loan from an NBFC?
Yes, it is safe to make use of this facility offered by NBFCs. These organisations are essentially lenders who function in the same manner as banks. But make sure you take loans only from the ones that are authorised and approved by the government to lend money.
4. Will I be able to pay off my debts faster with a debt consolidation loan?
The main advantage you will get from taking such a loan is that you will be able to have more control over your payments. Since you’ll have to make just one repayment every month, the chances of you missing a repayment are much lower. That said, you may be able to get a lower rate of interest. This will reduce your total loan cost and help you pay it off more conveniently. Also, if the lender allows you to prepay your loan, you can repay it faster.
5. Can I use a consolidation loan to increase my future loan limit?
Yes, you can make use of these loans to help you get better loans in the future. As you keep making repayments on time, your credit score will improve. A good score will help you get much better loan terms in the future including a higher loan amount.
6. Can I prepay my consolidation loan?
Yes, you can make prepayments if your lender allows you to do so. Most lenders in India allow you to prepay your loan after a stipulated time period (usually 6 months).
7. How does prepaying my loan help?
When you prepay a portion of your loan, the amount goes towards reducing your outstanding principal. This helps reduce the interest cost of your loan. Also, it will help you pay off the loan faster.
8. Will have I have to pay an extra charge if I prepay my loan?
Some lenders may charge you a fee for prepayment. This normally is a percentage of the portion that remains outstanding. Other lenders may charge you a fee based on the amount you prepay. Some lenders don’t charge you any fee for prepaying. This information is usually found in your loan document. If not, ask your lender directly before making a prepayment.
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