Personal Loans for Debt Consolidation: Everything You Need to Know

Personal loans are a favored product when it comes to the ability to fund various expenses. Personal loans are used for multiple reasons ranging from marriage, fixing a car, and renovating your house to funding your business. A very attractive ability of a personal loan is the fact that it can be used to consolidate debts. By the term consolidation of debts, you may infer that all debts are clubbed to one. Yes, this is what consolidation means and a personal loan can help to club all the debts for the purpose of repayment.

Why choose personal loans for debt consolidation?

Debts have this quality to increase in value and number very rapidly. This is because of the easy availability of debts and also the fact that attractive offers are available in the market. Therefore it is said that debts have a weird way of snowballing. Personal loans are taken for the purpose of debt consolidation and combine these various debts and balances into one amount that has to be repaid monthly.

Listed below are some reasons why you should consider personal loans for debt consolidation

• Single EMI payment

With the consolidation of debts, you club multiple debts into one and the repayment thus becomes easier. The number of EMIs to be paid reduces to a single payment. Since keeping track of all the payments for various debts is a hassle, consolidation helps to convert these into a single one.

• Lower Interest Rate

You may notice that the interest rate for a personal loan is lower than the interest rates of all the loans that you are paying separately. In such cases, taking up personal loans is a good option rather than paying more on separate loans. You should always compare the interest rates before taking a personal loan from one lender.

• Fixed Repayment

Personal loan repayments generally range from 1 year to 5 years. You need to repay the borrowed sum within the period. Knowing how much you have to pay every month to the lender helps to plan your budget and also pay the loan without any hassles.

Benefits of Personal Loans for Debt Consolidation

A few reasons why you should consider personal loans for debt consolidation are

• Quick Approval

Most lenders approve personal loan applications in a short period of time. The approval process is quick and hassle-free. The documentation process has also been made very simple and easy.

• Online Application

Many lenders nowadays allow borrowers to borrow loans online through their official websites. You can apply for a personal loan for debt consolidation with the help of the online application. The online application process also helps you to compare the various offers provided by lenders.

• Fast Disbursals

The disbursement time for the loans is very less. The loan is disbursed in as low as 48 hours from the time of application. If all the supporting documents are ready, then the disbursal time is very less and the amount is directly transferred to your account.

• No collateral or security

For a personal loan, you do not have to submit any collateral or security and thus it is easy to avail of this loan from the lenders.

• Flexibility

One of the key benefits of availing of a personal loan is that the loan can be repaid in a tenure that ranges from one year to five years. You can opt for a loan amount that is sufficient to pay off all your debts.

• Pre-payments

Lenders who offer personal loans generally allow you to make prepayments. There can be a certain fee that is imposed if you opt for this option. Choosing pre-payments can help you to pay off your debts faster.

Banks Offering Personal Loans for Debt Consolidation

A few lenders who provide personal loans for debt consolidation are given below

• Bajaj finserv

• Approval for a loan amount of Rs. 25 lakhs
• Pre-approved offers to select customers
• Flexible repayment option
• The interest rate is 12.99% per annum and the processing fee is 3.99%
• The approval process is fast and the disbursement is also instant
• The funds are received within a period of 24 hours
• Minimal documentation is needed for this loan
• The tenure of the loan ranged from 24 months to 60 months

• HDFC bank

• The amount that you can borrow starts from Rs. 40,000 to Rs. 40 lakhs
• The repayment period is up to 60 months
• The lender charges an interest rate of 11.25% per annum to 21.5% per annum
• The processing fee ranges between 2% – 3%.
• There is an option of prepayment for this loan
• The loan can be applied online

• Axis Bank

• The amount to be borrowed ranges from Rs. 50,000 to Rs. 15 lakhs
• The interest rate ranges between 16% to 24%
• The loan tenure ranges between 24 to 60 months
• The loan applications are approved quickly
• The disbursement is also instant

Does Debt Consolidation Affect Credit Score?

If you have multiple debts, managing these debts and making payments on time is a huge task.  If you miss any one payment, then your credit score may get affected and there may be penalties that are imposed.

For this particular reason, consolidating your debts makes it easier for you to manage multiple debts and make payments on time. Consolidation of debts does not affect your credit score if the payments are made on time and as per the EMI schedule.

Conclusion

There are a number of banks and financial institutions that offer debt consolidation. The interest rates for the personal loan used for this purpose are also very affordable. You can easily opt for a personal loan if you are facing issues while managing multiple debts in your portfolio.