Introduction

If you’re feeling weighed down by various debts, a personal loan could be the solution you’ve been searching for. In 2023, Forbes Advisor’s debt consolidation trends survey revealed that 54% of respondents turned to personal loans to simplify and reduce their monthly payments, 42% sought lower interest rates, and 35% aimed to lighten their overall debt burden.

A personal loan is a long-term borrowing option that doesn’t require any security or collateral. Let’s explore how managing debts with personal loans can be a practical and accessible path towards financial stability.

Why Should You Opt for Personal Loans for Debt Consolidation?

When someone wants to combine their debts, they usually approach a bank or another lending institution and apply for a personal loan to consolidate their debts.

In the case of a debt consolidation loan, the lender might pay off the borrower’s other bills, or the borrower may receive the money and use it to settle their remaining balances. But what advantages do these options provide? Let’s see.

One Payment for All Your Loans

Handling multiple loan payments each month can be tough. It strains your finances, and missing even one payment can result in penalties. However, using a personal loan to consolidate your debts allows you to combine them into a single monthly payment.

For instance, if you have two loans – one of Rs. 1,00,000 and another of Rs. 2,00,000 – each with monthly payments of Rs. 5,000 and Rs. 6,000, you can take a single Rs. 3,00,000 loan with a monthly payment of Rs.6,000. This simplifies the process and is known as debt consolidation.

Flexible Repayment Period

Most lenders offer personal loans for debt consolidation with a fixed repayment period of up to 6 years. However, they also provide flexible EMI options. You can start with lower monthly payments and gradually increase them over the loan term.

Low Interest Rate Personal Loans

Juggling multiple loans means dealing with different interest rates, which can cost you more in the long run. Consolidating your debts through a personal loan allows you to pay a fixed interest rate, reducing the overall interest paid.

If your credit score has improved, you might even qualify for a lower interest rate, saving money over the loan’s life. Explore lenders offering a personal loan prequalification process to ensure you get the best deal.

Settle Credit Card Debt

Personal loans can consolidate various debts, including credit card debts. If you’ve accumulated substantial credit card debt over time, a personal loan can help you pay it off in one go, avoiding additional penalties.

For example, if you have outstanding balances on four credit cards – A, B, C, and D – totaling INR 1,20,000 with APRs ranging from 16% to 25%, a debt consolidation loan with a lower APR can save you money compared to your current rates.

Alternatively, if your credit score has improved, you may qualify for a balance transfer card with a 0% introductory APR, allowing you to pay off your existing cards interest-free for a specified period.

Personal Loan Application Checklist

To master how to manage debts through personal loans,

• Keep an eye on your credit score. Gather documents like proof of income, an ID, and details of your current debts. Some lenders offer a paperless application process.
• Look into personal loan options from various lenders. Consider interest rates, terms, and fees to find the best deal.
• Carefully check the loan terms. Focus on interest rates, fees, and any extra charges to make an informed decision.

Wrapping Up

Consider consolidating your debts with a personal loan for effective debt management. Combining various debts into a single payment makes handling and paying them off easier. Find a low interest personal loan to save money. It’s essential to note that debt consolidation can affect your credit score, so stay on top of your payments to maximize its advantages.

Who we are

Arvog is a new-age, AI/ML-powered, customer-centric finance company that makes digital lending quick, efficient, and easy. We focus on digital personal loans and digital gold loans.