Personal loans: Have you ever considered whether a borrower – with multiple outstanding loans – contemplate taking a fresh loan? Is this advisable for him/her to take a fresh loan and using its proceeds to retire all the existing loans? Typically, it is a common practice and it offers multiple advantages such as ease and convenience of managing one loan only.
However, you must ensure that you do not end up with a higher overall cost such as processing fees and insurance charges. Therefore, you should consolidate debts only if you are confident that you will not raise any fresh debt.
Debt consolidation: These are some of the key advantages
Lower interest: If your new personal loan offers a lower rate than your current loans (credit card debts, payday loans, etc.), you can save a lot on interest.
Credit Score: If you clear numerous debts with a fresh loan and then pay your personal loan well on time, then your credit score is expected to improve considerably.
Single EMI: Rather than keeping track of 3 to 4 different due dates, you only have one instalment to pay every month — which is easier to manage for obvious reasons.
Fixed tenure: Some small loans or even credit card debts may not have a clear date of closure of loan. On the other hand, a personal loan typically has a fixed timeline (say, 3 or 5 years). Therefore, you exactly know when you will be debt-free.
Less stress: Less mental load from tracking multiple lenders, different penalties, and due dates.
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