Dealing with multiple personal debts might feel a lot like playing whack-a-mole – different bills with different due dates, minimum balances and late fines and penalties. Just when you’ve sent in one payment, another bill pops up. In such a situation, paying down debt should be a top goal.
There are mainly two ways in which you can consolidate your debt:
Personal loan balance transfer
It is a process of transferring your outstanding personal loan balance from one loan provider to another. A personal loan balance transfer works well in case you have already borrowed a loan for which you are paying a high-interest rate. It will help in saving on your EMI payments. Initially, this process only referred to the process of transferring the outstanding balance on your credit card to another, but now it includes personal loans, home loans, and other types of loans too.
A debt consolidation personal loan allows a borrower to roll multiple debts into a single window. If you’re having any doubt regarding the debt consolidation personal loans or not sure if consolidating your credit card debt is the right choice, consider the reasons mentioned below to consolidate your unsecured loans.
Paying off all the credit balances via a personal loan is the best way to save on your interest, increase your credit score and change your debt status that is from revolving to installment debt, among other benefits.
When we talk about the term’ revolving debt’, it is used for multiple credit cards. A credit card comes up with a limit and you can utilize as much as little of the credit line as you wish, without paying a set amount or making a pre-defined number of payments.
An installment debt is making a single regular payment with a start and endpoints, such as a mortgage, auto loan or student loan. Making a regular and on-time payments boost up your credit profile because it shows creditors that how good you are in managing your finances. By paying off your debt with a personal loan and moving your balance to an installment loan, helps you in increasing your credit score and the payment plan could help you get out of debt for good.
When you opt for a personal loan to consolidate your debt, you get a lower interest rate in comparison to the current interest rates that are you are paying on your unsecured loans. Due to lower interest rates, taking an online personal loan is a much viable option.
There might be a possibility that if you take too many loans or your credit utilization ratio is high, then also credit score of the borrower falls. When you decide on choosing an option of instant personal loan for debt consolidation, you get a chance to improvise your credit score. By taking a personal loan will help you in making timely repayments of all credit bills, then your credit score may improve shortly that will make you worthy of future borrowings.
Analyze your situation keeping in mind the above points and choose the option that suits you best. Don’t forget debt consolidation does not mean your debts are paid off – it just means that you get to manage it easier and possibly at a cheaper cost.