Are you overwhelmed by your debt? Does getting rid of all your credit card bills sounds tempting to you? Are you annoyed with multiple bill payments? Do you want to be on the road to being debt-free?
Then, debt consolidation is a sensible answer to all these questions.
What is debt consolidation?
Simply put, debt consolidation is the loan you take to pay off your multiple debts. All your debts are combined into a single, large debt and this amount is paid off using a debt consolidation loan.
The terms of a debt consolidation loan are usually favourable – lower interest rate and lower monthly payment. Hence, debt consolidation saves money by lowering the interest rate on debts and reducing monthly payments.
How to decide whether you need a debt consolidation loan?
1. The first step is to calculate:
- the total amount you pay for credit cards and other debts every month, and
- the average interest you pay on all these debts.
This is the baseline number you can use for comparison purposes.
2. Next, take a look at your monthly budget. Add up your expenses on basic necessities like food, utilities, housing, and transportation.
Now, how much money is left with you? That’s a critical question because it’ll help you decide whether you need a debt consolidation loan.
- If there is enough left to handle your debt, then you can organize your budget better and motivate yourself to effectively manage your debt.
- But if you consistently fall behind on your payments, effective budgeting and motivation won’t work. Debt consolidation is an answer to your debt woes.
Situations Where Debt Consolidation Loans Make Sense
You’re hopelessly drowning in debt. You know for sure that you don’t stand a chance to negotiate for a lower interest rate with your credit card companies or creditors. A debt consolidation loan may be a good decision for you.
You’re troubled with high-interest rates, multiple and high monthly payments. A debt consolidation loan might help you to pay off all of your debts at a fraction of their original cost and walk debt-free.
Debt consolidation loans can provide the breathing room you need to get out of debt and organize your finances. You save money on interest and you get out of debt faster than you could have ever imagined.
MoneyTap’s Personal Loan for Debt Consolidation
MoneyTap’s personal loan for debt consolidation can help you manage your debt and eliminate it faster than you possibly can think.
- Interest rates start at 1.08% per month – You get the personal loan at an interest rate much lower than what you are paying to your creditors.
- Flexible repayment options – The debt consolidation loan can be repaid in monthly instalments you are comfortable with. The loan tenure is from 2 months to 3 years.
- MoneyTap’s personal loan is given to you in the form of a personal line of credit – Use how much you need and pay interest only on the amount withdrawn from your line of credit.
Benefits of Debt Consolidation Loans
1. Reduces Rate of Interest
A debt consolidation loan brings down the interest you pay on your multiple debts. A loan taken for debt consolidation is usually at a lower interest rate than the interest you pay on your existing debts.
2. Improves Credit Rating
A debt consolidation loan allows you to pay off your outstanding debts on a regular basis. You just need to make one payment in a month. So, it’s easier for you to not miss a payment. A monthly payment made on time helps you to boost your credit rating.
3. Reduces Monthly Payments
A debt consolidation loan allows you to convert your multiple monthly payments into one affordable monthly payment for a longer tenure. This helps you to manage your debts and also save money on interest.
The sooner you decide to reduce your debt, the easier it’s going to be. Don’t let it reach a stage that’s not only overwhelming but embarrassing too. Consider debt consolidation to manage debt and to be free from it.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at email@example.com.