6 Reasons to Know Why Personal Loan Is Ideal for Debt Consolidation?
Personal loan offers plenty of benefits to borrowers who urgently need funds. One such benefit that is often overlooked by a normal borrower is debt consolidation. So, what exactly is debt consolidation and how does it help? Well, debt consolidation is a tool for refinancing existing debt. It is usually carried out by a person to pay off multiple existing debts using a new loan. You can improve your credit score by meeting your debt obligations on time. It is one of the most sought-after options for financing high consumer debt on a broad scale.
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How does Debt Consolidation work?
How exactly does debt consolidation work? Well, think of debt consolidation as a big loan to repay small loans without defaulting on your debt obligation. In this process, you get more time to pay the new loan that you apply for a more favorable term. This changes the loan repayment cycle in your favor. Repaying the new loan over time not only provides you with much-needed flexibility but also improves your credit score. One can easily search for ‘personal loan online apply’ and choose a suitable option. Most debt consolidation loans are fixed-rate installment loans. Since the personal loan interest rates are fixed, you can easily compute your monthly installments and create an accurate budget for yourself.
Here is an example to help you understand the process better. Let’s assume that ‘X’ is repaying his multiple credit card debts using a consolidated loan. Card 1 has a debt of INR 10,000 with 20% interest; card 2 has an outstanding balance of INR 5000 with 25% interest, and card 3 has a debt of INR 2000 with 30% interest. So, in aggregate. Now to repay all these existing debts on different cards, ‘A’ can take a the consolidated loan amount that would be sufficient to repay all of it. Now, he has the option of repaying the new loan through EMIs over the next few years.
Why Personal Loans Should be Used for Debt Consolidation?
Here are some of the main reasons why a personal loan is ideal for debt consolidation in the contemporary.
1.Flexibility to Use the Loan Amount
The flexibility to use the borrowed amount through a personal loan makes it a great fit for debt consolidation endeavors. For debt consolidation, you need to have the required flexibility for repaying other outstanding debt. You can choose to repay multiple loans using a personal loan if the borrowed amount is enough to meet the needs. You won’t be questioned by the lender on how you are using these funds.
2. Competitive Interest Rate
You must know that the interest rate on credit card loans is one of the highest. Other instant loans, such as debit card loans, have a relatively higher rate as compared to personal loan interest rates. One can easily opt for a personal loan from Fullerton India, which is one of the leading financial institutions in India.
3. Borrow a Large Sum
If you want to repay multiple outstanding debts, then the new loan amount should be relatively higher. One can easily borrow a higher loan amount using a personal loan. Reputed lending parties like Fullerton India offer personal loans amounting to INR 25,00,000. Besides this, the duration of repayment is also relatively higher and borrowers can choose up to 60 months of loan tenure for personal loan repayment.
4. Fixed Repayment Schedule
Most personal loans that are offered by various lending parties have a fixed interest rate. This means that you have a fixed repayment schedule. You can also change the amount that you will pay as EMI by modifying the duration of your loan. This can help you plan your budget better and help manage expenses with ease. You must always choose an EMI amount you are comfortable with. Planning your monthly expenses wisely can reduce the chances of default. Timely repayment will always work in your favor.
5. No Assets are Put at Risk
Personal loans are categorized under the unsecured loan segment. What does this mean? Well, this means that you don’t have to provide any collateral for taking out a loan and there is no risk of any confiscation of assets. This shouldn’t act as an encouragement for defaulting on your loan because it can hamper your credit score and this will limit your chances of obtaining credit in the future. However, since no security is pledged, borrowers have some peace of mind.
6. Instant Approval and Disbursement
Getting a personal loan today doesn’t take weeks. You can get your loan approved almost instantly. Once your documents are processed, the loan can be disbursed within 24 hours into your bank account. The ‘personal loan online apply’ process has streamlined things and reduced the processing time drastically.
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