Are Personal Loans Right Choices For Bad Credit Debt Borrowers
February 19, 2024
As a person, you have many responsibilities when it comes to your finances. You are either responsible for extra expenditure like shopping, movies, food, etc, or you’re in the junction of paying your business expenses. No matter what expenses you incur with a credit card or a personal loan, it is difficult to pay off unpaid outstanding debts. The reason can be many, including different due dates, negligence, or financial distress! You wish someone would take care of the loan repayment for you so that your debts can be easily paid off.
And there exists debt consolidation method. You will further understand the concept of what debt consolidation is and how it works in India.
Simply defined, debt is money borrowed from banks, NBFCs, or digital lenders and repaid later. Any unsecured loan taken from banks, NBFCs, or online lending needs to be paid back later.
One should be careful, while opting for loans because the repayment is always higher than the amount borrowed due to interest rates and other charges as well.
Debt Consolidation is a method designed to consolidate all your outstanding debts by combining interest rates into one debt with a fixed rate of interest. This makes it easier to track and repay your debts at the earliest. This is the most convenient way to protect yourself from debt problems.
Debt consolidation can help borrowers in many cases like:
· Multiple debts and finding it difficult to repay it
· High interest charged on debts
· Difficulty in maintaining the repayment procedure
A debt consolidation loan will combine all your existing debts into a single loan with a fixed interest rate. The loans that are consolidated are unsecured loans such as credit cards or personal loans. Other secured loans like a house or car loan can’t be consolidated as they have collateral attached to them.
If you are considering consolidating your debts, you should consider what the rate of interest will be on the consolidated debts from your earlier loan. The difference must be significant in order to benefit from the consolidation of their debts.
Consolidating your loan can help you maintain a credit score as you will not have to deal with repayment procedures, reducing the chance of mission one.
When you consolidate your debts, you have the opportunity to replace the higher interest rates with lower interest rates. It effectively reduces your monthly bill payments, reducing your monthly financial burden substantially.
With the help of loan consolidation, you can simply payoff your debts in one payment every month. It will help you to manage your debts effectively.
When you opt for debt consolidation, you’re now eligible to pay the debts every month.
The only reason why you have used your credit card excessively is because of poor financial habits. Consolidating your debts won’t improve your financial stability. Instead, it only furthers the illusion that you’re paying off your debts when the reality is something else.
Hence, it is advisable to be extra careful while consolidating your unsecured debts so that you can even focus on your financial growth.
One of the biggest disadvantages is that people commonly opt to take out secured loans to consolidate their debts. In a secured loan, the borrower agrees to risk an asset as collateral. If the individual fails to repay its secured loan.
There are several ways one can consolidate their debts to manage it better and these are as follows.
As there is a rise in digital lending of loans, it has become easier than before to take an unsecure loan with cost-effective interest charges. Some of the unsecured loans that can be obtained easily are personal loans.
A number of fraudulent incidents involving illegal loan apps have arisen, whereby the app scams our personal information and without our consent transfers a specific amount into our account and charges us with high interest and threatens us with abrupt repayment. It is necessary to understand that any loan lending app should be registered under official guidelines put forth by the Reserve Bank of India.
Sometimes a credit card company offers attractive deals and lower interest rates to attract new customers. In case, if you find such an offer, you can simply transfer your credit card balance to your chosen provider. The only negative point of this type of payment is that it’s not available every time to everyone
This is the rarest option, one can opt for if there is no other means of payment through consolidation. In secured loans, you can borrow against any of your secured assets like your home, life insurance, or car. You can use this loan as an option to repay your debts through consolidation
It involves a huge risk, which is a major drawback of secured loans. If you’re unable to pay for this loan, you’re at risk of losing it.
When you’re struggling with repaying your debts or have an unsecured loan that has high interest rates, you can consolidate your debt by paying only the minimum cost.
Nonetheless, debt consolidation is not the last thing that can impact your ability to pay your debt, you can also opt for a Debt Management Plan. If you feel you are not in a position to repay your EMI’s, a debt solution is always available. A debt solution program with us will give you an affordable Debt Management plan so you can repay your debts and live stress-free. Contact SingleDebt on +91 961 910 3594 or fill out the form either on the home page or contact page.
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