Consolidating debts increases financial efficiency. Rather than allowing your debts to increase over time, you can take stock of all your dues and consolidate them with a single loan. This reduces your monthly financial burden and helps you manage your loan better. This is just the first of many benefits that debt consolidation offers. Here is a closer look at how it helps you manage your finances better.
Offers a low-interest rate loan
Let’s assume you have several pending dues, including credit card debts and other term loans, which you have taken at different points in time. Over the years, these big and small debts have amassed to a sizeable amount. Diverting a significant part of your income monthly towards repaying these debts puts a burden on your finances. Instead, consolidate these loans and bring them under the umbrella of a single loan. This enables you to pay them off quickly and makes managing the debt easier.
You can get access to a larger loan by taking a loan against property. Pledging a property will also give you access to a loan with a lower interest rate.
Lowers your monthly expenses towards the loan
Debt consolidation wraps up all your debts and dues under one loan. This not only simplifies matters since you only have to pay one EMI every month but also lowers the EMI amount considerably. For example, let’s assume that you are paying Rs. 5,000 for each loan every month. If you have 4 loans, you will pay Rs. 20,000 as EMIs, while the principals cumulatively add up to over Rs. 10 lakh. Now, once you pay off the debts using the loan against property, you will have only one loan to clear off, whose monthly EMI will be less than Rs. 20,000, especially if you choose a long tenor of up to 18 years.
Additional Read: 3 ways to ensure that you don’t default on your loan against property
Improves your CIBIL score
Too many ongoing loans and pending debts reflect poorly on your credit score thereby bringing it down. When you pay it off using one loan, your credit score will instantly improve. Moreover, as you repay your debt consolidation loan, this score will improve further. If you choose a debt consolidation loan with flexible prepayment terms, you can further boost your CIBIL score.
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