Loan Consolidation; Know If It Is Right For You

Outlook Money

Loan Consolidation

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

Loan

EMIs

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

EMI

Unsecured Loans

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

Loan

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.

unsecured loans

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.

Interest Rate

3. Temporary Cash Shortage

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

cash shortage

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.

Factors

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.

Pre-Closing A Personal Loan: Know If It Is A Right Decision

Read More