The Easy Way To Debt Consolidation
As one goes through life and tackles various responsibilities, they accrue debt in various forms. You could have a house loan, car loan and credit card loan to your name. But handling multiple loans is difficult, and a good solution is to try and consolidate the debt using a personal loan.
What does ‘debt consolidation’ mean?
The term is quite self-explanatory; it implies that all the debt in an individual’s name is brought under one single debt, i.e. it is consolidated. It is done by taking a fresh loan to repay multiple smaller loans. Debt consolidation makes it easy to handle multiple loans by bringing them under a single one.
Cash loans or personal loans are often taken to consolidate debt. The following section explains the rationale behind this.
How to use a personal loan for debt consolidation
- The personal loan must be of a substantial value, or the exercise becomes futile. For example, if you have two loans amounting to Rs 1.5 lakh and Rs 40,000 respectively, then the personal loan you take must exceed a value of Rs 1.9 lakh (Rs 1.5 lakh + Rs 40,000). Only a higher value cash loan can repay the earlier smaller loans. Taking a loan of a lower cumulative value does not help the purpose. Check your loan eligibility before you decide on debt consolidation using the personal loan
- Once you get the personal loan, you can close the earlier smaller loans by paying them off to the respective lenders. The only loan you now need to service is the personal loan. It can be repaid every month to the lender through EMIs. Leading apps do not impose foreclosure charges if you repay the personal loan early – indeed, they encourage early closure so that you get out of debt faster
- Being responsible about personal loan repayment is key. Never miss the EMI due date, and aim to close the loan before tenure to improve your credit score
- Debt consolidation improves overall credit score and repayment history since loans are repaid earlier than tenure
How to get a personal loan on a loan app
Install your preferred loan app on your smartphone. Do ensure that it is a reliable app with the latest version and good user ratings. You can find the app on the Google Play Store or Apple App Store
Study the ‘personal loan’ section. It outlines all the features and benefits of the cash loan. Check the loan eligibility criteria, interest rates, processing fees, documents list and repayment modes
Apply for the loan by uploading your self-attested documents as directed. After this, await the app’s approval and loan disbursal
Once approved, the app disburses the loan to your bank account. It can now be withdrawn to repay the other debts
Conclusion
A personal loan helps consolidate debt in a simple, convenient manner. Do ensure that you take the loan from a reliable lending app.
