How To Consolidate A Previous Debt Through A Credit Line
eing in debt is far from ideal, but borrowing a loan is sometimes the only solution one has. You may wish to buy a house, or invest in a second car, or even finance a foreign holiday with your family. These things take a lot of money, and you might not have sufficient savings to meet your requirement. Instead of spending all your savings, it is better to take loans that meet different needs. There are both secured and unsecured loans you can borrow to make your dreams come true.
However, servicing multiple loans is a drain on your resources. Every loan has an EMI that must be paid, and multiple loans results in multiple EMIs. In turn, these various EMIs chip away at your monthly salary, leaving less and less for other expenses.
If you are faced with this situation, you must consider debt consolidation.
What is debt consolidation?
As the term suggests, it is a method of consolidating or bringing together different debts under one. It is also taken to mean that one loan type, whether secured or unsecured, repays multiple other loans taken previously. For example, you may borrow a loan to pay off the last few instalments of your home loan to close the latter for good.
Debt consolidation is recommended for better financial management (it is easier to manage one loan than multiple ones), saving on interest payments, and to get out of debt faster.
Some loans that can help you consolidate previous debt like house, car or home renovation loan are home top-up loans, personal loans and credit line loans.
Should you borrow a personal loan or line of credit loan?
Since you are looking to consolidate previous debt using a new loan, we recommend taking an unsecured loan with a competitive rate of interest, such as a personal or line of credit loan. When borrowed from a reliable lending institution such as an instant loan app, either loan helps to consolidate/repay old debt. With their short tenures, it is possible to become completely debt-free in just a few months.
We recommend going with a line of credit loan if it is a smaller amount, or a larger personal loan if the previous loans are large.
What to keep in mind when consolidating previous debt through credit lines…
- If you are an Indian national residing in India and have a regular salaried income with a good credit score, then you are eligible for line of credit loans
- Do not borrow multiple lines of credit. Each is charged interest, so cumulatively, you end up paying more interest on the credit line loans
- You must borrow this loan only if you ensure periodic repayment, thus ensuring that credit is continuously available whenever you need it
- Leading instant loan apps are better suited to offering credit line loans to individuals – they are more responsive, have minimal documentation and set-up, and faster in processing the loan request
Conclusion
Debt consolidation improves financial efficiency, and helps you leverage the right tools like line of credit loans to close previous loans.
