Loan consolidation is one of the more frugal approaches to ensure hassle-free debt management. In simple terms, it pairs multiple credit liabilities together and ensures that the borrower has to pay a single type of EMI, instead of the disparate ones.
Opting for multiple credit lines and loans isn’t something to be ashamed of. Regardless of your existing financial liabilities, payable in multiple EMIs, there would be a time when every outstanding loan amount can be taken under the same roof, especially as a consolidation loan. However, the idea here is to consolidate with care and ensure that your new financial liability is easier to manage as compared to the existing ones.
How to Approach Loan Consolidation?
Loan or rather debt consolidation is a simple and straightforward approach. It concerns taking a new loan that pays for each of your existing loans and ensures that you only have one EMI plan to account for. In most cases, the multiple credit lines are combined and approached as one standalone loan, thereby minimizing the separate interest rates.
What transpires is the lower interest rate on an average followed by favorable repayment terms, which work towards reducing monthly obligations.
Perks on Consolidating Debts
Now that you have decided to consolidate the existing debts by opting for one of the best personal loans or business loans in case of entrepreneurial liabilities, it is necessary to understand the benefits of this strategy, beforehand:
- One for Many
Having one ongoing loan as compared to four sounds nice! However, apart from minimizing the hassles, it also makes it easier for you to manage transactions now that there is only one EMI obligation to deal with.
- Lower Interest Rates
Multiple loans can be attributed to accruing interests. However, the single credit line approach ensures that you only have to consider interest accumulation for one liability, which is oddly more affordable in mathematical terms.
- Improved Credit Score
While you open one loan account, you end up closing others. This approach is expected to have positive implications on your credit score.
- Multiple Options to Choose from
If you plan on canopying each of your existing debts under a single loan, you are at the liberty to choose right. It is important to cross-reference the rate of interest of personal loans before proceeding as you do not want to open a credit account that ends up charging you more than the other debts, combined.
Apart from these benefits, a single personal loan also offers a fixed tenure for repayment, which you can decide at your convenience.
Now that you have made up your mind about loan consolidation, it is necessary to compare multiple lenders, existing interest rates, and other factors before proceeding. Plus, regardless of the one you choose, using an EMI calculator to pre-ascertain EMIs and overheads is also important. However, Finserv MARKETS makes it easier for you to select the lender of choice, as per your financial preferences.