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Simple and Smart Ways of Debt Consolidation

Simple and Smart Ways of Debt Consolidation

Are you troubled with multiple loan repayments every month? Fret not! You can club all your outstanding debts into one master account by opting for debt consolidation. Read on to explore smart and easy ways to consolidate your debt.

What is Debt Consolidation?

Debt consolidation means combining different loans or debts into one single loan so you can manage payments more easily. Instead of paying multiple EMIs for credit cards, personal loans, or other borrowings, you avail of one new loan to clear all existing debts. This leaves you with only one EMI every month, making it a lot easier to manage your budget.

Debt consolidation meaning, in simple words, is replacing many payments with one easier EMI.

It reduces confusion, improves repayment discipline, and can even reduce the interest rates if the new loan offers better terms. If you’re wondering how to consolidate debt, the process involves choosing a lender, applying for a consolidation loan, and using it to pay off all existing debts.

Also, read – Multi Purpose Loan

Smart and Easy Ways to Consolidate Your Debt

1. Consolidate Debt Using a Personal Loan: Your Smart Choice

If you are servicing multiple active loans and it is hard to keep track of the EMI dates, you can opt for personal financing to consolidate your debts. This allows you to pay off several debts in one go. Before approaching your lender, calculate your EMIs and interest payable with a loan EMI calculator to plan your repayment.

Besides, you can repay your loan conveniently with single, low-cost EMIs instead of multiple ones with higher interest rates. With Tata Capital, you can get competitive personal loan interest rates starting at 10.99%.

Before applying for personal finance to repay your existing loans, credit card dues, and other debts, keep the following points in mind. Identify your debt obligations, debt tenure, and the overall amount you owe. After you pay off your outstanding dues, strictly stick to your consolidated loan’s payment cycle to not default on EMIs.

2. Use a Home Equity Loan for Debt Consolidation

Another way to consolidate debt is by availing of a home equity loan. Here, you borrow funds by pledging your residential property or commercial building as collateral. Since there is no restriction on how you spend the loan amount, you can easily use it to repay your pending debts.

3. Consolidate Credit Card Debt with a Balance Transfer

If you want to consolidate your pending credit card dues, there’s an easy solution for you. All you have to do is make a credit card balance transfer. Through this, you will shift your single or multiple credit card debts to a new credit card from a different lender. However, you should only transfer your credit card balance if you get a more affordable interest rate and a higher credit limit.

The balance transfer allows you to reduce your penalty expenses and clear your pending dues with monthly low-cost payments.

Also, read – What is CKYC

Benefits of Debt Consolidation in India

There are several benefits of debt consolidation, such as:

1. Lower Interest Rates

One of the major advantages of debt consolidation in India is that you may get a lower interest rate. For example, if you are paying very high interest on credit cards or loans, moving everything into one personal loan can reduce the total amount you pay.

2. One Easy Monthly Payment

By consolidating your debt, you don’t have to remember multiple due dates. Instead, you just have to pay one EMI every month. This reduces stress and helps you stay organised.

3. Lower EMIs

If the new loan offers a better rate or a longer tenure, your monthly EMI can be reduced. This helps you save more of your monthly income or manage other expenses comfortably.

4. Better Credit Score

Paying one EMI on time is easier than handling multiple payments. By paying your EMIs consistently and on time, your credit score can improve, providing long-term debt relief benefits.

5. Quicker Repayment

A structured plan helps you close your debt faster compared to paying small amounts across multiple accounts.

Eligibility Criteria for Debt Consolidation Loans in India

To combine your loans and other debt, you need to meet some basic debt consolidation loan eligibility conditions. 

These include:

  • Age: One of the most important eligibility criteria for debt consolidation in India is that your age must be between 22 and 58 years.
  • Income: You should earn a minimum monthly income of Rs 15,000.
  • Stable Job: You should have at least one year of total work experience and six months with your current employer.
  • Credit Score: You should have a strong credit score of 750 or more.
  • Residency: You must be an Indian resident to meet the debt consolidation eligibility criteria.

Also, read – What is Credit Appraisal

Key Considerations Before Consolidating Your Debt

Before exploring how to consolidate debt, it’s important to carefully review the debt consolidation pros and cons. 

Here are some tips for consolidating debt that’ll help you make an informed decision:

  • Compare Interest Rates: Make sure the new loan has a lower rate than what you currently pay. Otherwise, you won’t truly benefit from consolidation.
  • Choose the Right Tenure: A longer tenure lowers your EMI but increases total interest. Pick a balance based on your income.
  • Check All Fees: Processing charges and prepayment fees can affect your overall savings. So, make sure to review them carefully.
  • Avoid New Debt: Don’t apply for new loans or credit cards after consolidation, as it can increase the debt consolidation risks.
  • Review Your Credit Score: A strong score can help you get competitive interest rates and better terms.

Conclusion

Do you want to consolidate your pending debts? Turn to Tata Capital, and get an instant personal loan for debt consolidation. Our collateral-free personal financing is available with attractive loan interest rates, minimal documentation, and flexible tenures. Enjoy quick loan processing, sanction, and disbursal of funds.

Furthermore, you can use our personal loan EMI calculator as well. This will help you figure out ideal monthly instalments and interest payable on your loan by entering the loan duration, amount, and interest rate.

With us, you can opt for structured EMI plans to repay your consolidation loan conveniently. Why, yes! If you expect salary hikes or bonuses shortly, you can choose our Step Up Flexi EMI Plan to pay smaller EMIs initially and pay higher EMIs as your income increases.

Moreover, at Tata Capital, you can pre-pay part of the loan amount any time after 6 months of getting personal financing without any additional charges or penalty.

Want to know more about our loan offerings? Check your personal loan eligibility and clear your pending debts today!

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FAQs

What exactly is debt consolidation?

Debt consolidation means combining many loans or credit card debts into one single loan. Instead of paying multiple EMIs, you pay just one EMI every month. It helps make repayment easier and more organised.

How can debt consolidation help me manage my finances?

 

Debt consolidation simplifies your payments, reduces stress, and may also lower your interest rate. Plus, since you only have to manage one EMI, it becomes easier to track your expenses and avoid missing payments.

Which types of debt can be consolidated in India?

 

In India, you can consolidate credit card bills, personal loans, consumer loans, and buy-now-pay-later EMIs. Many unsecured debts can also be merged into one personal loan for easier repayment.

Is a personal loan a good option for debt consolidation in India?

 

Yes, a personal loan can be helpful for debt consolidation in India as it usually has a lower interest rate than credit cards. It also gives you one fixed EMI and a clear repayment timeline.

What are the eligibility criteria for a debt consolidation loan in India?

 

To secure a debt consolidation loan in India, your age should be between 22 and 58 years. You should also have a stable income, at least one year of work experience, and a good credit score.

Can debt consolidation negatively impact my credit score?

 

Debt consolidation can cause a small dip in your credit score initially due to the loan inquiry. But your score improves over time if you make regular on-time payments and reduce your credit usage.

When should I avoid consolidating my debts?

 

You should avoid debt consolidation if the new loan has a higher interest rate, high processing fees, or if you're likely to take on more debt again.

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