Materialistic needs and high expectations can trap us in an endless loop of debt. After all, who can resist using that leftover limit on your credit card, a zero percent EMI offer, or that sale with huge discounts?
Would you be taken aback if we told you that the same financial system that gave you all the loans also gives you a way out of the problem?
Lately, personal loans have become increasingly common – especially for debt consolidation.
A personal loan to pay off high-interest credit card debt might sound harmless, but it shouldn’t be done carelessly.
Rolling multiple debts, typically high-interest debt such as credit card bills, into a single payment is plausible for moderate amounts of consumer debt.
You can use a personal loan for anything and everything you want. But if you’re thinking of using it as a debt consolidation loan, here’s a list of things to keep in mind:
A good credit score:
If you want favourable terms and a low-interest rate on your loan, you’ll need at the very least, a good credit score.
You have debt with high-interest:
If you manage to qualify for a lower rate than what you’re paying currently, going for a debt consolidation loan should be a no brainer.
You have a repayment plan:
Credit cards have no preset repayment plan. If you continually use your card and pay only the minimum amount due every month, you could very well be stuck in a debt trap. Personal loans have a set repayment term making them an outstanding alternative.
Single EMI vs Multiple EMIs:
A Personal Loan for debt consolidation allows you to centralize all your EMIs into a single EMI and pay off your debt, so you no longer have to keep track of the various EMI dates or fret about missing them. Of course, making a monthly single loan payment via EMI is easy.
Debt consolidation for debts on credit card:
If you fail to pay off your credit card dues on time, you will greet penalties. Instead of using revolving credit on your cards, you can take a single Personal Loan which enables you to pay a lower interest rate on your debt. You can also pay it off in easy EMIs over some time.
Quicker Debt Payoff:
A personal Loan comes with a fixed EMI and interest rate over a stipulated tenure, varying from 3 months to 3 years. After debt consolidation, you can also pay off your loan in a short period, with a single payment each month, at a fixed rate of interest.
If you find yourself persuaded to step into the province of Debt Consolidation, before you apply, figure out what the loan’s lifetime cost will be. We suggest you use a credit card payoff calculator and analyze your expenditure if you continue paying on your credit cards instead.
Then determine if you’ll save sufficient to make the loan process worth it.
Consider the loan quantities, repayment periods, and other features to ensure you find the exact fit. The best debt consolidation loans offer low-interest rates, flexible repayment terms, and low or even no fees. Lenders mostly allow you to get prequalified for a loan before you officially apply.
A consolidation loan may be alluring because it frees up available credit on your credit card. But if you just transfer the debt, and rack up more on those cards you just paid off, you could end up in an even worse financial situation.
Before moving forward with a loan, we advise you to address potential spending issues.
Countless people are now turning to platforms like EarlySalary to avail loans instantly and especially in times when stepping out of the house is dangerous. Honestly, the SalaryCard from EarlySalary is your easiest solution.
At EarlySalary we offer Financial Wellness solutions, Financial Planning, and many more services. Click here to acquaint yourself with the benefits of availing loans from EarlySalary and the required procedures. We can be reached all day on: