personal loan for debt

Benefits of Taking Personal Loan to Pay Off Debt

September 02, 2022 • 191 views
Author: PoonawallaFincorp Category: Personal Loan

Personal Loans are a great way to acquire high-value funds when an individual is facing a liquidity crisis. As the name suggests, a Personal Loan can be used for a variety of purposes that are unique to each borrower. There are no restrictions on the end use of Personal Loans, which makes them one of the most popular financial products available in the market. 
When it comes to borrowing a loan for paying off your existing debts, you can consider taking a Personal Loan. You can get a Personal Loan from a traditional lender or a new age Non-banking Finance Company (NBFC) like Poonawalla Fincorp. With technological advancements in the finance sector in India, NBFCs such as Poonawalla Fincorp are offering Personal Loans in a completely online manner with attractive interest rates and minimal documentation, thereby providing a best-in-class experience.

Benefits of Using A Personal Loan To Pay Off Debt

Before you plan on applying for a Personal Loan, let’s take a look at some of its benefits:

Higher borrowing limit

In most cases, Personal Loan borrowing amounts are higher than other loan amounts. Since there is no restriction on how you want to use your funds, it can be a good option that can be used for paying off your debt. In addition to this, you can also negotiate the borrowing amount according to your repayment capacity. However, the loan amount will be finalized by the lender after checking your credit score and other required documents. 

Competitive interest rates

 With the growing popularity of Personal Loans, lenders are offering loans at attractive interest rates. You can also use an online EMI calculator to calculate your monthly EMIs and benefit from lower interest rates on a Personal Loan. 

No collateral required

As there is no need for collateral, a Personal Loan is an unsecured loan. It is important however to make timely repayments every month to avoid default and bad credit history. 

Easier to manage

Instead of borrowing from acquaintances and other lenders, getting a Personal Loan will help you in managing your repayment in a better manner. When you borrow funds from multiple sources, the chances of getting into a debt trap are high. With a Personal Loan, you can get lump-sum funds and will only have to pay the monthly EMIs. 

Longer repayment tenure

You can benefit from a longer repayment tenure with a Personal Loan. This means that you can plan your finances and expenses accordingly throughout the loan tenure, thereby avoiding any kind of financial distress.

Also Read: 6 Easy Ways To Fast Pay Off Your Personal Loan

How can you use a Personal Loan for debt consolidation?

A Personal Loan can be of use if you are seeking to consolidate your debt. In this process, the lender either pays off your debt directly, or you can use the loan to pay off your dues. After you have paid the previous debt, you will have to pay a single payment every month. 
These monthly loan installments will be lower as the tenure of the loan period will get extended. In this way, a Personal Loan can be a great option if you do not want to have multiple repayments. While you are in the process of debt consolidation, you must avoid taking up more loans. If you take on any other debt during the process, then be cognizant of your repaying capacity as else there are chances that you might end up in a debt trap. 
In addition to this, if there are any delays in repaying the debt, you will be charged with fines and penalties, depending on the lender. Let’s look at some benefits of using a Personal Loan for debt consolidation. 

  • Repay your loan faster: With a Personal Loan, you can repay your debt by paying more than the minimum repayment amount. 
  • Easier to manage: As you are paying only one instalment every month, your credit score will be maintained as there are no multiple payments. 
  • Lower interest rates: Unlike loans from unorganized sources, you will benefit from lower interest rates. 
  • Boost your credit score: This will help in recovering your credit score with timely payments during the tenure. 
  • Manage your funds easily: Through this, you might get a chance to improve your income-to-expenses ratio as the monthly payments and interest will reduce. 

Conclusion

If you feel overwhelmed with multiple repayments that you must deal with every day, you can consider taking a Personal Loan to clear your debt. Debt consolidation has some reassuring benefits. If you understand how it works, it can be a fantastic financial tool to manage loan repayment. Many Non-Banking Financial Companies (NBFCs) such as Poonawalla Fincorp offer Personal Loans at attractive interest rates. If you wish to consider applying for a Personal Loan, conduct thorough research and choose your lender wisely.

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