April 14, 2024

Justice for Gemmel

Stellar business, nonpareil

Debt Consolidation – A smarter way for managing your finances

Debt Management Tips

When you have a lot of loan repayments every month, it is not easy to streamline your finances. Sometimes, it becomes difficult for you to manage expenses when you have multiple loans to worry about. You may have a personal loan, home loan, credit card EMIs, student loan, four-wheeler loan, or any other debt. However, you can get rid of all the troubles that you would have to deal with for multiple monthly repayments by opting for debt consolidation.

It is one of the best ways to channelise your loan expenses. Here, we are going to learn more about debt consolidation, ways to consolidate your debt, when you should consider debt consolidation, and more.

What is Debt Consolidation?

Debt consolidation is all about clubbing your multiple loans into one larger and single loan by paying off all other existing loans. You can either take out a single loan or apply for a credit card with a larger limit to close all other debts.  This way you will have only a single EMI to run every month. It is often recommended for those who do not wish to deal with multiple payments and high interest rates each month. Moreover, it becomes too hectic to keep a tab on all due dates.

Ways to consolidate your debt

There are three major ways to consolidate your debt into a single payment. 

Personal Loan

Personal loans are often considered the best way to consolidate your debts as they generally have lower interest rates. Whether you are having multiple dues on credit cards or cash loans, you can apply for a personal loan and clear off all your existing debts. Banks offer personal loans for self employed as well as employed individuals.

Credit cards

You can also apply for a credit card with a larger limit to close all other debts and loans. However, always ensure to get a credit card with the lowest interest rates so you have a favourable monthly instalment to pay. You can also do the balance transfer on your new credit card and pay the amount in full during the promotional period (which often lasts from 6 to 24 months) with a 0% annual percentage rate.

Home equity loans

Another way to consolidate your debts into one single payment is through a home equity loan. It is a secured loan wherein you have your home equity used as collateral. It is often a preferred method for debt consolidation as it offers lesser interest rates in comparison to credit cards.

When You Should Consider Debt Consolidation

You should go for debt consolidation if:

  • You have multiple monthly loan repayments
  • Your debts are at higher interest rates
  • You’re unable to manage your monthly dues and other finances
  • Have a good credit score to manage a new loan
  • Wish to have a smooth cash flow

So, now that you know the fundamentals of debt consolidation, go for it! Apply personal loan, credit card, home equity loan, or anything that would keep you away from multiple loan dues and hectic payment schedules.