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Using a Personal Loan to Manage Debt: What You Need to Know
Are you stressed because you have several EMIs or hefty credit card bills coupled with increasing rates of interest? Don’t worry; there are a lot of people out there just like you! Keeping track of and managing multiple debts can be stressful and costly. One way to take control is to use a personal loan for debt consolidation.
Debt consolidation combines multiple repayment obligations into one single manageable monthly payment. All this article will discuss is how personal loans can help manage your debts, how to use them, and things to think about before applying for any personal loan.
Can You Use a Personal Loan to Handle Debt?
Absolutely, a personal loan is one of the ways to consolidate debt. Because for personal loans, you won’t need to provide collateral to qualify. You can borrow the amount needed to pay off your high-interest credit cards, payday loans, or other debts. Once the debts are settled, you only have one account to pay off, which is the personal loan.
Benefits of Using Personal Loans for Debt Management
Simplified Repayment Process
Listening to multiple due dates and EMIs across several lenders can be physically and mentally taxing. A personal loan consolidates all of those payments into a single monthly EMI. This makes it easier to reduce confusion, also allowing you to budget more easily and keep your payment schedule.
Potential for Interest Savings
Credit cards and short-term loans usually have very high-interest charges, maybe higher than 30% annual interest. Since you can often qualify for a personal loan at a lower interest rate, you can pay back less in total interest. After including a personal loan processing fee, you can still pay back less than the original debts bore.
Fixed Tenure with Fixed EMIs
Personal loans have fixed repayment periods and monthly payments, or EMIs, so you’ll know the exact time you will become debt-free. This kind of structured spending can alleviate stress, and you’ll be better off with your other financial goals–like how to fund an emergency fund or where or how to invest for the future.
Minimal Documentation with Fast Processing
Most lenders have minimal documentation, which generally consists of basic personal loan documents such as identity proof, income proof, and address verification. The application process is typically uncomplicated and generally takes a short time.
Considerations When Taking Personal Loan for Debt Consolidation
Look at Personal Loan Eligibility First
Before you make a personal loan application, it is worthwhile assessing your personal loan eligibility. Lenders will consider your credit score, income level, job security, and your financial obligations before providing a loan. If you have a high credit score, it will increase your chances of being approved for a personal loan and may also be useful for negotiating a better interest rate, which will reduce the overall amount you will pay for the loan.
Have A Definite Repayment Plan
Unlike credit cards, you won’t have flexible payments with a personal loan. The loans require monthly EMIs, and there won’t be a flexible minimum payment option. This means you have to pay the instalment amount according to the repayment schedule. If you miss a payment, you may face a decrease in your credit score and face financial penalties. So, take into consideration your budget on a monthly basis for making the instalment payment.
Avoid Falling into the Debt Blackhole
When you pay off your credit cards or small loans, there is often the temptation to repurpose those accounts. If you are not disciplined, this can lead to bigger mistakes. Think of your personal loan as a financial reset, and do not use it as a reason to exploit your spending. Make the commitment to be debt-free long-term.
Choose the Right Lending Partner
Always choose a lender that you can trust. lendingplate provides a quick and easy way to check for preliminary eligibility, access user-friendly loan calculator, and receive quality customer service without long waiting times. Choosing the right lending partner will take away the anxiety of hidden fees or personal loan processing fees and other headaches that may rob you of peace of mind.
Conclusion
If you are considering using a personal loan to consolidate debt, try to think about how that will provide you clarity, structure and peace of mind. You will have taken the uncertainty and chaos of multiple repayment obligations and replaced it with a single manageable financial obligation. Consolidation is an opportunity to treat debt responsibly; it is not a chance to be irresponsible with your debt. With proper planning and with the right lender, you can have less financial worry and, at the same time, a great way to plan for improved financial wellness and lifestyle!
