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Complete Guide on How to Consolidate your Debt

Debt consolidation is a process where an individual pays off multiple short-term, smaller debts using a single high-value loan. It is one of the most preferred methods of clearing high-cost debts like credit card bills that tend to accumulate into a substantial amount.

Debt consolidation loan in India has witnessed significant growth in the last few years, thanks to the various features and benefits which it offers.

How to consolidate debt?

Availing a loan for debt consolidation involves several steps. A borrower should carefully go through the entire process to ensure maximum benefit from the debt consolidation loan. Here are some of the most important aspects one should consider before availing a credit.

  • Calculate the due amount –

A borrower should carefully consider the exact loan amount he or she requires before availing a loan for debt consolidation. Determining the exact sum will ensure one does not face any financial difficulty while repaying the newly availed loan; it will also help calculate other applicable fees like foreclosure charges, applicable taxes, etc. Determining the total credit liability will help save on EMIs by consolidating debts.

  • Make a repayment plan –

A repayment plan will ensure that a borrower does not face any financial difficulty while paying off a debt consolidation loan. It will also ensure timely repayment of the credit, helping build a good credit history during the repayment tenor.

  • Apply for a loan for debt consolidation –

After determining the total credit liability, one can apply for a loan for debt consolidation. Considering the total outstanding amount and repayment capability, one can select either unsecured loans or secured credits to consolidate their debt.

Short-term unsecured credits, like a personal loan for debt consolidation, are better suited for multiple high-interest debts like credit card dues. These credits offer a substantial sum of up to Rs.25 lakh, which can help mitigate all financial requirements with ease.

There are several financial institutions that offer such credits to eligible applicants. Companies like Bajaj Finserv offer such advances against an affordable rate of interest and flexible repayment tenor, ensuring easy repayment of the credit.

They also provide pre-approved offers that simplify the process of availing a credit and helps save time during the process. Such offers are available on both secured and unsecured credits, including personal loans, business loans, home loans, etc. You can check your pre-approved personal loan offer online by sharing only some essential details.

Why opt for debt consolidation?

Recent studies show steady demand for debt consolidation loans, especially amongst credit card users. Debt consolidation loans in India can also prove beneficial for individuals servicing multiple EMIs, allowing them to repay the outstanding dues and make sum repayment of all debts via a single line of credit.

There are several other benefits of debt consolidation, let’s take a look at some of them.

  • Lower rates of interest – Debt consolidation loans may prove to be a viable option as it helps lower the interest liability of a borrower. Instead of repaying multiple lines of credits at a varying rate of interest, a borrower repays a single debt at a significantly lower rate of interest.

Credits like personal loans have become one of the most preferred methods of consolidating debt, as these come with no end-use restrictions and a competitive rate of interest.

  • Improvement in CIBIL score – Foreclosing multiple lines of credits is likely to have a positive impact on a borrower’s CIBIL score. Moreover, timely repayment of the debt consolidation loan will also help an individual improve their credit rating over time. It is one of the main reasons why a borrower should consider debt consolidation.
  • Faster repayment – Another debt consolidation loan benefit is its faster settlement process. Borrowers can foreclose their existing lines of credit and service only one debt, which helps repay the total due much quicker.

The above mentioned details decode what is debt consolidation and offer step-by-step guidance on how to apply for such a credit. Following these guidelines can help improve a borrower’s credit score, stabilise their finances, and save a considerable sum during their loan repayment.

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Written by Pardeep Sharma

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