Personal Loan Debt Consolidation |Things To Know - Unity Bank
5 min read | 10 months ago
Are you facing a situation where multiple debts are piling up due to missed payments? Have trouble managing different due dates and repayment schedules for your debts and loans? If any of these situations sounds familiar, then a personal loan for debt consolidation may be your best solution. Debt can compound into unmanageable amounts at times. It may erode your savings and hinder your financial stability. It is where consolidation with a personal loan can help you immensely.
Here is a guide to the same in this article.
What is Debt Consolidation and What are Its Benefits?
Debt consolidation means combining multiple loans or debts into a single loan. It will have a lower interest rate and monthly repayment amount, while the tenure may also be longer. You can take a personal loan to consolidate debt, helping you simplify repayment and loan management. It will help you lower your monthly outgo, save on interest, and pay off the outstanding amount more efficiently.
Here are some of the benefits of debt consolidation with a personal loan:
> Rather than taking care of multiple loans and debts, it makes sense to streamline them into a single personal loan. It means saying goodbye to keeping track of different due dates. You can also ensure a single interest rate for your outstanding debt.
> Debt consolidation with a personal loan often helps reduce interest rates compared to credit cards and other forms of debt. It will help you save more money in the long haul.
> You can plan your finances better with fixed monthly payments.
> Boost your credit score over a sustained duration by consolidating debt and repaying it promptly.
> Avoid late fees and defaults by tracking and repaying just one personal loan.
> Reduce mental stress that otherwise arises from managing multiple loans or debts. A single personal loan will give you more control over your finances.
Identify Eligible Loans and Understand The Process
There are several types of debt consolidation strategies that you should keep in mind. One option is combining multiple personal loans into one bigger loan with a single monthly EMI. It will lower your rate of interest while simplifying loan management simultaneously. You may even take a personal loan to repay your outstanding credit card balances with a better interest rate.
You can also combine various kinds of debt like credit cards and personal loans under this system. You can take a personal loan to pay off these outstanding amounts and repay only this loan for a particular tenure. For example, suppose you have two credit cards with a debt of INR 2 lakh combined and a personal loan with an outstanding amount of INR 3 lakh. You can get a fresh personal loan for INR 5 lakh and repay these individual debts before beginning to pay off the loan amount at a lower interest rate.
Most financial institutions also have specific eligibility criteria for personal loans. These usually include the following:
> A good credit score of 700-750 or higher.
> A stable income that will help you repay the loan smoothly.
> A lower debt-to-income ratio (the amount of debt against your income).
> Employment history, nature of your job, and overall profile.
> You should meet the age requirements and be an Indian citizen/permanent resident.
Steps For Consolidating Debt
Here are some of the steps that you can follow to consolidate debt with a personal loan.
> Calculate the amount you need to clear your existing credit card or personal loan debts.
> If you have bigger EMIs on home or car loans, account for these payments while consolidating your unsecured debts. Make sure you have sufficient funds to repay your loans on time.
> Apply for a personal loan for debt consolidation after choosing a lender. Ensure that you meet the eligibility criteria and share all necessary documents. These include your income, age, address, and identity proof.
> Note the terms and conditions of the personal loan carefully, including the tenure, prepayment charges, processing fees, monthly EMI, interest rate, and other policies.
> Once the personal loan gets approved, you can receive the funds into your account. Use them to close all your pending dues at other financial institutions.
Considerations Before Opting for Consolidation
Here are a few things to consider before choosing a personal loan for debt consolidation.
>The interest rate
> Processing fees and other charges
> Prepayment conditions and charges/penalties
> Credit score and other eligibility requirements
> Loan tenure
> Reputation and track record of the lender
Conclusion
Get a clear picture of the money that you stand to save in terms of interest costs over a specific tenure. A Credit Information Company report states that almost 50% of the working population of our country is in debt. So, while debt is unavoidable at times, it is important to manage it properly. It is thus vital to ensure that you clear pending debts and combine them into a single personal loan for convenient repayment and financial savings in the long run. You can take a look at digital personal loans offered by Unity Small Finance Bank to cover debt repayment expenses in this regard.
FAQs
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
Related Blogs
Guidelines for Repaying Your Quick Personal Loan -Unity Bank
How To Get a Personal Loan with Bad Credit Score- Unity Bank
How To Get a Travel Loan for Your Dream Honeymoon - Unity Bank
Instant Personal Loans Guide For Financial Need - Unity Bank
Reduce Debts: Pay Off Credit Cards with Personal Loan - Unity Bank
