When Should you Choose a Personal Loan for Debt Consolidation?

16 Jan 2021 6 min read
News: When Should you Choose a Personal Loan for Debt Consolidation? - Afinoz

You must have availed some kind of debt or a credit instrument across any nook of your life. Debts are often a portion of our financial strategy in the interest of obtaining our goals or to fulfil any financial flaws that hamper in our way.

Although, controlling debt is as significant as availing the financial assistance when you are in need of it. Badly handled debts can often result in lowering the credit score and affects your credit history negatively which particularly hampers with your likelihood of potential borrowings.

How to manage and relieve your debts?

While building a careful financial strategy, you must make sure that you don’t acquire multiple debts at a certain time as it just maximizes your hassle factor to handle multiple moneylenders, their service terms, instalment dates, etc.

In such moments, going for debt consolidation can stand as one of the optimal choices for you. It can uplift your chances to resolve your mistakes made while financial planning. To perceive this concept seamlessly, let’s plunge into ahead and learn stoutly.

What is debt consolidation?

Debt consolidation is a financial plan taken in use to help you get relief with the repayments resulting through multiple existing debt instruments.

These debts comprise any and every types of personal loans, transport loans and credit card outstanding bills leading to multiple credit cards.

Opting for debt consolidation will help you blend all your existing debt obligations into one single loan. This not only facilitates in relieving you from the headache of paying off several debts but also helps save on the different kind of fees and charges including the interest rate.

When to choose debt consolidation?

You know about the debt consolidation now but it can still be really stressful to determine when to choose debt consolidation. There could be a few situations you couldn’t recognize but that might be slowly alleviating you towards a debt trap condition.

To comprehend this better, we have drawn the top 5 conditions that could be asking for debt consolidation so that you can get rid of the potential overburden of your debts:

  • Wild habits of spending

If you are maniacal to plenty of festive offers and are inclined towards investing your money often in multiple buying, it would significantly be hard to fulfil all your debt repayments along with your unwanted expenditures.

Therefore, it is suggested that firstly you plan and arrange to pay off your debts on time. If you finish spending too much time on determining which debt to take off first, simplify it by choosing debt consolidation.

Opting for debt consolidation with a personal loan will facilitate you in taking off your stress to repay all your existing debt obligations respectively means you can pay them at once.

  • Extremely dependent upon credit cards

One of the reasons that you might come across a nerve-racking situation for your debts is that you are very much dependent upon your credit cards.

To get rid of paying high rates of interest on credit cards, it is optimal that you merge the bills by means of a personal loan.

There are personalized loans structured to combine credit card bills uplifting from multiple credit cards that you possess - the Credit Card Takeover Loan.

This debt consolidation loan facilitates you get rid of all your debts in one time and alongside only at just half the rate of interest! You can also choose a personal loan since it would also support you turn your outstanding dues into instalments.

  • High Debt-to-Income (DTI) ratio

Debt-to-Income ratio is also an important parameter that determines your financial health and debt folder.

DTI is the ratio of debts which you borrow against the income you have earned. If you recognize that the debts you’ve borrowed are using up over 50% of your monthly income, then significantly it is giving you a signal that you must reconsider your debt folder.

If your debt-to-income ratio is between 30 to 50% then it is deemed to be a wholesome DTI ratio. Therefore, anything surpassing the stated figure requires to be taken into consideration for debt consolidation since it will support in diminishing the instalment and will also help you handle your repayments.

  • No contribution to monthly savings

Savings are the principal source that stands out to be useful in times of unanticipated conditions or any sort of urgent contingencies.

As a matter of fact, many proficient advise that if you are a working professional then you must save at least 20-30% of your monthly income.

If you are not able to do so due to some other debt repayments and monthly expenditures, it is the time, you should go for the debt consolidation alternative.

If you choose to consolidate your debts with a personal loan, it will not only help you lower your monthly expenditures but also significantly help boost liquidity and contribute more towards monthly savings.

Conclusion

As a whole, a personal loan is a smart alternative which can positively be handy for your debt consolidation as you move from high interest rate debts to one single affordable loan. You can also take the help of online debt consolidation calculator.

It eliminates the hassle of handling debts of multiple lenders and remembering multiple due dates resulting in multiple loan repayment schedules. This makes sure that you can manage your finances in an enhanced way and can positively contribute towards your credit portfolio too.
Eventually, there is an ample number of moneylenders that offer debt consolidation loans in India, if you are unable to figure out the best, don’t worry! Reach Afinoz and we’ll help you out further seamlessly.

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