Juggling Too Many Loans? How To Consolidate Your Debt With A Personal Loan

High-cost debt can be pretty stressful. It can take a toll on your finances and even affect your short and long-term financial goals. If you have taken on a lot of high-cost debt, the mounting EMIs and interest rates may compel you to dip into your savings and deplete them. However, another option can come to your rescue – taking a lower-cost, long-term Personal Loan for debt consolidation. Here is why it makes sense to consolidate your debt with a Personal Loan.

Debt consolidation is a way to simplify managing your debts. It combines multiple debts, such as credit card balances or loans, into a single monthly payment. This loan doesn't erase your debt but restructures it so you can pay it off more comfortably.

You can streamline your repayments when you consolidate your debt with a single Personal Loan. Instead of juggling multiple EMI due dates and risking penalties for missed payments, you only need to manage one monthly EMI payment. This simplifies your finances significantly compared to handling 3-4 separate EMIs. A Personal Loan for debt consolidation merges all your existing EMIs into a single manageable payment, helping you effectively pay down your debts.

• Assess Your Debt: List all your debts, including credit cards, student loans, car loans, etc. Note the interest rate and monthly payment for each.

• Check Your Credit Score: Your credit score will significantly impact your interest rate on a personal loan. Ensure your score is in good standing to get the best rates.

• Research: Look for reputable lenders and compare their offerings, interest rates, and terms. Online lenders, credit unions, and banks are good places to start.

• Apply for the Loan: Once you've chosen a lender, apply for the loan. You must provide some personal information and details about your income and employment.

• Pay-Off Debts: If approved, use the funds from the personal loan to pay off your debts. This consolidates multiple payments into a single monthly payment.

• Stick to a Repayment Plan: Ensure you can afford the new monthly payment. Create a budget that allows you to pay on time each month.

• Avoid Accumulating More Debt: Avoid accumulating more debt while paying off the personal loan. This also means not using your credit cards unless you can pay off the balance each month.

• Reduced Interest Charges: Debt consolidation can reduce the amount of interest you pay. This can help save you money over time.
• Expedited Loan Payoff: Consolidating at a lower rate allows you to allocate more towards paying off your debts sooner.
• Better Credit Standing: Effective handling of a consolidation loan can lead to a better credit profile over time.
• Regular Payment Structure: Consolidation ensures a steady monthly payment amount, aiding in financial management.

Credit cards are highly convenient as you do not have to pay upfront cash. However, you must pay off your credit card dues on or before your statement date. You must pay penalties if you fail to pay off your credit card dues on time. Credit cards typically charge a higher rate of interest than a Personal Loan. Instead of using revolving credit on your cards, you can take a single Personal Loan to pay a lower interest rate on your debt. You can also pay it off in easy EMIs over a while.

A Personal Loan comes with a fixed EMI and interest rate over a stipulated tenure, ideally lasting 1 to 5 years. Once you have consolidated your debt, you can also pay off your loan quickly, with a single monthly payment at a fixed interest rate. Since credit cards generally do not have any set repayment periods, people tend to ignore that the interest rates keep accumulating until the debt is paid.

Click here if you want to apply for an HDFC Bank Personal Loan

Read more about how you can escape a debt trap with a Personal Loan here.

*Terms and conditions apply. Personal loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Banks requirement.