Loan Consolidation; Know If It Is Right For You

Loan Consolidation

It is a process that involves getting new loans to settle several existing ones.

EMIs

By loan consolidation, a borrower pays off for a single loan instead of managing various EMIs.

Unsecured Loans

These loans are simply termed as "debt consolidation loans." These loans have no collateral provided, so are usually unsecured.

Who Should Consider It

1. Several Unsecured Loans: For an individual with two or more personal loans, credit card payments, or small-ticket EMIs, consolidation can organise finances for him/her.

2. High-Interest Debt

People who have high credit card dues, or with loans carrying high rates of interest can benefit from the consolidation of a loan that has a lower rate of interest.

3. Temporary Cash Shortage

Borrowers with temporary repayment difficulties can ease their burden by choosing an extended loan period through consolidation.

Factors to Consider

Loan consolidation is not always cost-saving. Though EMIs are reduced with a higher tenure, this can add to the total interest burden over a long period.

Compare

Loan consolidations must be compared with the collective cost of the combined loan which includes fees and interest and the aggregate cost of all the current loans.

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