Debt consolidation means to amalgamate multiple debts into a single debt. One of the ways by which debt consolidation can be made is by securing a personal loan.
Explore the loan aggregator that can benefit your repayment with a lower interest rate and increase your CIBIL score. Buddy Loan is one of the good loan aggregators you can switch to avail a loan without collateral. This means that a person with multiple debts can secure a personal loan and can use that amount to repay those debts. This way there is a reduction in the number of debts as the person will only have to repay the personal loan.
There are benefits as well as down-sides to consolidating debts with a personal loan.
BENEFITS
1) Lower interest rates – When there are multiple debts, the amount paid for the interests could be more, or a few debts may have higher rates of interest. In such cases, if you consolidate these debts with your personal loan which has a lower rate of interest, it can benefit you monetarily.
2) Predetermined amounts – When debts are consolidated with personal loans, there is only on debt, and therefore the interests are to be paid during specified intervals and the term period for repayment of the loan is also pre-determined.
3) Improves credit – In case your credit card payment is due, it is better to consolidate it with personal loans as it would improve your credit.
4) Unsecured personal loans – Unsecured personal loans are those where no collateral is required to procure them. It is a great idea to consolidate debts where the collateral is involved with an unsecured personal loan.
DOWNSIDES
1) Greater rate of interest – If the rate of interest for a personal loan is greater than your other debts, then it is not advisable to consolidate these debts with a personal loan. This is because of higher the rate of interest, the more the amount you would spend.
2) Longer term-period – The term of the personal loan must also be taken into consideration while attempting to consolidate your debt through a personal loan. If the term of repayment of a personal loan is long, then it is obvious that you will have to pay to spend more on paying interest.
3) Assets could be risked – If you consolidate your debts with a personal loan that requires collateral, then you put your assets into danger.
Therefore, the conclusion that can be drawn is that you can consolidate your debts with a personal loan. But before doing so, it’s important to weigh the terms of your personal loan to that of the debts and to analyse whether it would be beneficial to you.
