Key Things to Know Before Using a Personal Loan for Debt Consolidation

Managing multiple debts can be overwhelming at times as they have their own due dates and repayment terms. Multiple monthly repayments can often strain your finances and at times tracking them can become challenging. This is where a debt consolidation comes in, where you can combine your multiple debts into one single loan. A Personal Loan for debt consolidation not only streamlines your repayments but also lowers interest rate and monthly repayment. In this blog, let’s understand the things you must know before consolidating your debt. Read on!

Factors to Consider Before Using a Personal Loan Debt Consolidation

Before taking a Personal Loan for debt consolidation here are some factors you must consider:

1.    Interest Rates
The main goal of debt consolidation is to lower the cost of your debt. Compare the interest rate of different lenders for taking a new Personal Loan with your current debts. Ensure the new loan offers you a lower rate.
2.    Loan Terms
Check all the terms of loans carefully and understand that in the repayment period, a longer loan term means smaller monthly payments but could result in higher overall interest paid. So, choose a loan term that balances affordability and cost-effectiveness.
3.    Fees & Charges
Different lenders may charge different fees and charges, such as processing fees of loan amount, pre-payment penalties if you repay early and repayment charges.  Ensure that you read the fine print to ensure there are no hidden charges.
4.    Credit Score Impact
A Personal Loan can either boost or harm your credit score. If you make on-time payments, your credit utilisation ratio may improve, benefiting your credit score. However, missing payments or defaulting could lower your score.
5.    Debt Management Discipline
Maintaining discipline in debt management is crucial, as debt consolidation can facilitate financial stability. However, it is equally essential for you to adopt improved financial habits to ensure long-term success.
6. Eligibility Criteria
When you apply for debt consolidation loan, the lenders evaluates your loan eligibility, which commonly includes – income stability, employment status, credit history.  
7.    Fixed vs. Variable Rates
The interest rate can be divided into the following two types: 
Fixed Interest Rate: Payments remain constant throughout the loan period, better for budgeting.
Variable/Floating Interest Rate: Monthly payments can fluctuate based on market rates. 
Now lets take a look at the benefits of debt consolidation in the next section. 

Benefits of Debt Consolidation

Debt consolidation can be a smart financial move if you're juggling multiple debts. Here are some key benefits:

•    Lower Interest Rates: If your credit score has improved, consolidating debts into a single loan may reduce your overall interest rate, saving you money.
•    Simplified Payments: Instead of managing multiple due dates, with debt consolidation the EMI payment turns to a single monthly payment, making budgeting easier.
•    Potentially Lower Monthly Payments: Extending the repayment period, you might reduce your monthly financial burden.
•    Improved Credit Score: Making consistent payments on a consolidated loan can positively impact your credit score over time.
•    Reduced Stress: Managing multiple debts can be overwhelming. Consolidation provides a clearer path to financial stability.

To Conclude

Debt consolidation through a Personal Loan is one of the wise financial decisions to simplify repayments, reduce interest costs, and lessen the stress associated with multiple debts. However, before proceeding, it’s important to carefully evaluate factors like interest rates, loan terms, fees, and eligibility requirements to ensure the consolidation truly benefits your financial situation. While the process can streamline debt management, maintaining discipline and adopting sound financial habits will be essential to prevent future debt accumulation. 
Turn your multiple debts into one with Poonawalla Fincorp’s Personal Loan for debt consolidation and enjoy, high loan amount, attractive interest rate and flexibility repayment tenure. So, wait no more. Apply now! 

Frequently Asked Questions

1.    Can I consolidate all types of loans?
Yes, you can consolidate various types of loans, including credit card debt, personal loans, car loans, and student loans.

2.    How can I apply for Poonawalla Fincorp’s Personal Loan for debt consolidation?
Applying for a Personal Loan for debt consolidation is simple, here are a few steps you must follow:
Step 1: Click on “Apply Now”
Visit Poonawalla Fincorp’s official website and tap on the ‘Apply Now’ button to initiate your application.
Step 2: Enter Your Details
Enter your DOB, PAN card number, monthly income, and residential details.
Step 3: Upload Your Documents
Upload the necessary or required documents for quicker approval.
Once your verification is successful, the loan amount will be disbursed into your bank account instantly.

3.    What is the credit score requirement for a Personal Loan for debt consolidation?
Different lenders have different credit score requirements. However, to avail of Poonawalla Fincorp’s Personal Loan you must have a credit score of 750 and above.