Is loan consolidation even worth it ? Here’s what Andromeda suggests
Due to lack of financial literacy, most users these days lack the ability to plan their finances diligently and find themselves in the middle of a financial quagmire where there is a burden of multiple loan EMIs and overdue credit card payments. Nowadays, getting a credit card or any other line of credit has become very convenient and effortless that makes users more prone to getting into a debt trap due to over-spending. For such a scenario, not many will advise you to apply for another loan, but by doing so you can easily clear off all your existing credit dues and start paying for one.
Debt accumulation
If you are someone drowning in the sea of multiple loans, whether accumulated credit card bills or a small ticket loan, not many would have advised that you must consolidate your existing loan accounts into one and relieve yourself from this juggernaut of EMIs and bills. Now you must be in a dilemma whether this would actually solve your problem or will add to the ones that already exist?
So suppose you have an ongoing education loan or an automobile loan, or an outstanding debt obligation on your credit cards, if compared to a personal loan – these credit facilities attract a substantially higher rate of interest, which becomes an unnecessary burden while there are cheaper options available.
Avail a Personal loan
The most suitable approach is to get in touch with a banker/consolidator and ask for a personal loan that can substantiate for all the debt that exists. A higher principal amount will help you clear all existing small loans and credit card payments and the rate of interest applicable would be less as compared to the existing one. With a single EMI, now you can concentrate and minimize your payment to one, without squandering money to never ending debts. It affects your credit score a little due to delayed payments, but after consolidation as you start paying your personal loan EMI on time it climbs back faster. Debt consolidation carried out through a personal loan also gives you a flexible time frame where in you can choose to repay the loan amount between 1 to 10 years.
Interest burden
Once a borrower applies for a personal loan to consolidate various debt accounts into one account, they are liable to pay interest payments for a single loan account. Also, the rate of interest applicable is comparatively less as compared to a credit card account, which eases off the interest burden every month. For those who use their credit cards excessively, going beyond a certain budget might prove to be quite expensive. There might be multiple loans running for a single individual, like an education loan, an automobile loan, credit card bills and others, all these credit instruments attract a relatively higher rate of interest and consolidating them into one saves a lot of money over a period of time.
Yes, it’s worth it
No more worrying about keeping a track of different EMIs and payment dates as every now and then you miss a deadline and have to pay additional charges on late payments. On the top of it, when all your loan accounts are consolidated into one, you can consider making extra payments each month by the money you save every month. Over a period of time, you can end up saving a lot more than you expect. Also by paying a single EMI every month and that too without any defaults, you can easily improve your existing credit score which can help you get a better deal on loans the next time you apply for one. Once you identify individual loan amounts, tenure and overall interest to be paid, avail a personal loan and the end of the tunnel is right in front of you. Leave the debt trap and live freely.
