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Why take a Personal Loan Low Interest for Debt Consolidation?

There are times when you need adequate funds to deal with an emergency. If you do not have them, life becomes stressful. To meet the urgent needs of funds, individuals can take a personal loan online. Such loans help you to manage crises and meet sudden expenses. Personal loans have become a very popular way to arrange funds by individuals to meet unforeseen expenses. Though personal loans help you to meet the financial crisis, multiple debts can be stressful. The huge burden of debt takes away peace in life. Individuals are always under stress when they have to repay the debt within time.

If you have multiple debts such as unpaid credit card bills, auto loans, etc., it becomes difficult to track the payments along with household and professional responsibilities. If all the installments have different dates of repayments, there may be chances to omit a payment. Hence, debt consolidation is the best way to manage debt and make repayment on time with a personal loan low interest.

Personal Loans from Banks Documentation Process 

  1. Photo identity and age proof such as voter ID card, passport copy, driving license, electricity bill, bank passbook, or statement 

  2. Colored photograph

  3. Duly filled application form 

  4. Address proof such as Aadhaar card, rental agreement, passport copy, electricity bill, driving license. 

  5. Last 6 months bank statement 

  6. For salaried applications, 3 months’ salary slips, Form 16, and income tax revenue 

  7. For self-employed applicants, 3-year income tax returns, 3 years balance sheet, and profit loss account. 

  8. Other documents may be required by lenders depending upon the profile of the borrower. 

Features and benefits of personal loans for debt consolidation 

Given below are the features and benefits of personal loan offers for debt consolidation- 

  • Quick approval –Personal loans require minimum formalities and get approved quickly. Lenders quickly approve your loan application with supporting documents. 

  • Quick sanction process– Personal loans from banks are sanctioned based on the income status and credibility of the borrower. As these are unsecured loans, they are quickly disbursed within 1-2 days. 

  • No security– Personal loans are unsecured loans where borrowers get the loan amount based on their profile. As no security is attached, the loans are disbursed quickly. 

  • Online application– When you choose to personal loan apply, you can easily upload documents online. You can research personal loans online and compare the interest rates offered by the banks. As the process is online, the application is processed quickly. 

  • Flexibility in payments– Borrowers prefer personal loans as they can be easily repaid within a span of 1-5 years in easy EMIs. Make sure you request a loan amount that you can easily pay off within the approved tenure. 

  • Pre-payment facility– The borrowers can pre-pay the personal loan amount and get relieved from the burden of debt. Pre-payments can help you to get rid of the burden quickly as and when funds are available. 

  • Avoid taking help from people– When you have multiple debts, the borrower fell into a trap of taking more debt to repay the debt. The chain of debt does not end and stress increases. When a borrower does not get a loan from a bank, he may look for help from friends, family, and acquaintances. Debt consolidation is a way to avoid such an embarrassment and repay the loan quickly. 

  • Instant approval– Personal loan low interest is preferable because you can get instant disbursal based on your credit score and loan eligibility. 

Factors to consider when taking a personal loan for debt consolidation 

You can opt for debt consolidation when you have multiple loans or credit card debt for ease in debt management –

  • Tenure of existing debts– Before opting for a personal loan in Mumbai for debt consolidation, you must check the tenure of your existing debts. If the tenure is short and you will be able to repay the debt within a few months or this year, there is no point in taking a personal loan for debt consolidation. 

  • Credit score– The credit score of a borrower is very important when going for a personal loan eligibility check. For a borrower, the minimum score to be eligible is 750. The range of a credit score is 750-900. If you want personal loans with a low CIBIL score, you may still be able to get one, but at a higher rate of interest. Before applying for a personal loan for debt consolidation, it is imperative to check your credit score for eligibility. 

  • Criteria for eligibility– Lenders provide certain eligibility criteria that differ from bank to bank. Before applying for a personal loan, you must check the eligibility criteria given by the lender with regards to work experience, profession, age, etc. 

  • Compare interest rates– As personal loans are unsecured loans, the interest rates charged by the lenders are higher in comparison to home loans. Before applying for personal loans for debt consolidation, the borrowers must check the interest rates offered by different banks and financial service companies. 

  • Repayment term– The borrowers can opt for tenure up to 1-5 years. Before applying you must go through the existing debts and how would you repay the loan amount with flexible terms. Before approaching the lender, you must consider these terms and a personal loan eligibility check. 

Debt consolidation vs. Balance transfer – Which is a better solution? 

Repayment of huge debt is quite frustrating and stressful for a borrower. It becomes to repay when you have multiple debts or debt at a higher rate of interest. For effective debt management, a borrower has two options such as debt consolidation and balance transfer. 

A balance transfer is a solution for a borrower who has existing debt at a high rate of interest. If you opt for a balance transfer, it means that you are transferring your debt to a different lender at a lower rate of interest. It is beneficial as it lowers your EMI payments. But if you have multiple debts, debt consolidation may work for you as it consolidates your debt into one at a single rate of interest. It relieves you from the stress of making multiple debt repayments. 

Which is a better solution? You must look into your financial requirements, nature of the debt, financial needs, and future income prospects before you choose an option. Both solutions may be effective for you but it’s better to go for a solution that helps you to get rid of debt easily.

How does a good debt consolidation strategy work? 

Debt consolidation can be very beneficial for a borrower as it manages your debt effectively. 

  • Reduces EMIs – If you have taken multiple debts, debt consolidation is an effective strategy for debt management. You can reduce multiple EMIs into a single EMI and focus on the arrangement of funds for a particular date. Therefore, the chances of defaults reduce. 

  • Reduce interest rate– When there are multiple debts, you have to make repayments at different rates of interest. It becomes stressful for the borrower to manage debt and household expenses. Debt consolidation enables a borrower to repay the debt in a single EMI at a lower rate of interest. It becomes easier for the borrower to repay debt with a lower rate of interest. 

  • Improve credit score– Your credit score is based on how you repay your debt and credit utilization rate. If you make defaults on multiple debts, it reduces your credit score. Hence, when a borrower opts for debt consolidation, you can repay your debts quickly that positively impacts your credit score. 

  • Simplifies payments– Rather than making multiple repayments on different dates of a month, it is easier for a borrower to repay it in a single payment. Hence, debt consolidation is a way to set one single payment to repay your debt quickly. 

Conclusion

Debt consolidation means merging the multiple debt repayments into a single one that would be deducted monthly. You can pay off all your debts with one single payment as equated monthly installment (EMI). It gives you a sigh of relief as you focus only on one single payment or date. Make sure that adequate funds are available in your bank account for the deduction of a single EMI to avoid a default.