7 Reasons You Should Definitely Opt For A Debt Consolidation Loan

Are you straddled with multiple debts and struggling to make your repayments on time? Maybe you have a super busy schedule and can’t seem to keep track of various credit card EMIs. If so, a debt consolidation loan may be just what you’re looking for!

Having various debts can have a negative impact on your credit score and when you fail to make repayments, you risk getting blacklisted by lenders. A debt consolidation loan is a smart way to manage your finances and make sure you stay on track. By transferring all your existing debts into a single big loan and the pending balances, you also end up getting more time to pay back. Here are 7 reasons why you should opt for a debt consolidation loan along with the various benefits:

1. It’s Completely Online

Maybe you’ve heard stories about sitting down with credit counseling services and having a word with them when applying for a debt consolidation loan. Paying debts comes with its own set of challenges and jumping through many hoops to get a loan amount disbursed may feel daunting. These days the process has been made easier.

Consumers can apply for debt consolidation loans online and get the desired amount they need. Agencies and credit lending organisations have made the whole process paperless, which means you can apply for a new loan at your fingertips. Just make sure you’ve got your KYC documents and ID proof ready and you’ll be good to go.

2. Enjoy Lower Interest Rates

Let’s say you’ve got two debts which have an interest rate of 12% and 10% each with different repayment tenures. With a debt consolidation loan, you can combine them into a single EMI payment and get a flat interest rate. You don’t have to worry about paying two interest rates and in this way, save money on your interest.

Credit card companies and organisations provide lucrative interest rate offers for debt consolidation for borrowers who demonstrate sufficient creditworthiness and have a good CIBIL rating. It’s that simple.

3. Longer Repayment Tenures

Borrowers have a tough time paying back multiple debts when they’re always on the edge. Keeping track of repayments, missing reminders, and defaulting on timelines can lead to consequences. Debt consolidation loans take all the pending dues and transfer the balance into single EMI monthly EMIs. The tenure is longer for repayment since borrowers are consolidating debts from multiple sources. Higher-priority debts are cleared off first with lower-level interest rate debts being at the bottom of the list.

The lender you’re taking a debt consolidation loan through is usually in charge of arranging the order of clearance for all your existing debts. In short, you get more time to pay off your other loans with a single big loan and don’t worry about having to communicate with multiple individual lenders.

4. May Improve Your CIBIL Score

If you take out a debt consolidation loan for clearing off your pending debts, you can give your CIBIL score a nice boost down the line. That’s because these loans are treated just like personal loans by CIBIL and logged in their database.

When you make timely repayments and clear your dues early, your credit utilisation ratio dramatically decreases. You might experience a small drop in your credit rating when taking out a debt consolidation loan but this is offset later when you make early repayments. Many financial institutions and companies give lucrative loan offers to individuals who pay off their debt consolidation loans quicker. If you’re thinking of taking other types of loans like car loans, gold loans, or home loans in the future, it’ll be a lot easier to get your application approved due to your higher CIBIL score.

5. Clear Off Debts Sooner

When you club your payments together into single EMIs, it’s a lot easier to keep track of the overall amount. Due to the lower interest rate and flexible EMI tenure, you may find that you clear off your debts sooner. It’s not uncommon for borrowers to find two or three debts that last for 5 to 6 years see them get cleared in about 4 years since they get more time to pay back the individual principal amounts through debt consolidation. Overall, it’s a win-win for lenders and borrowers since it makes financial management easy.

6. Less Emotional Stress

You don’t have to stay up all night worrying about whether you missed another payment. There’s less psychological pressure when you go for debt consolidation. Borrowers don’t have to think about following up with multiple lenders. All this equates to lower stress levels which improve your overall productivity later on. By taking control of your finances and adding structure to your repayments, you make the process of clearing off multiple debts easier. The lower your emotional stress, the better decisions you can make about your finances too.

7. Can Use Them For Any Reason

One of the perks of these loans is that you can take out money to pay off any kind of debt. You can combine your education loan and credit card bills together into a single debt consolidation loan.

If you’d like a debt consolidation loan for clearing off any pending payments for your Amazon EMIs, you can do that too. Just keep in mind that your credit bracket will be influenced by your CIBIL Score.  If you already have a good credit profile, taking a debt consolidation loan will let you enjoy lower interest rates and give you extra time to pay them back. This means more room for spending money on the things you want which can be freeing in a way. As long as your finances are in check, you’ll find they offer you greater flexibility.

Conclusion

If you’re thinking of applying for a debt consultation loan but still not sure, you can talk to a financial advisor. Sometimes borrowers require extra time to clear off debts and it’s not a matter of running out of money. Debt consolidation loans are available to both salaried and self-employed individuals. As long as you are a resident of India and have the proper documentation, you can apply for one online.

The process for disbursing a debt consolidation can take between 2 to 4 business days depending on your credit rating and financial profile. The key requirement most lenders look for in applicants is proof of creditworthiness, so make sure you have proof of stable income and your bank statements in hand before applying.