Refinance an existing credit with debt consolidation
Credit cards represent a large part of our daily financial transactions. The ability to spend now and pay later is something that comes in handy most often. Whether it’s daily dinners, weekend getaways, or any ambitious need, we rely heavily on credit cards.
A significant 26.5% increase in transaction volume, value and average ticket size has been observed over the past year. And with the big announcement of credit card-enabled UPI payments, our reliance on these debt instruments will become inevitable.
Likewise, personal loans have been recognized as a trump card in planned or unplanned events. Along with enticing offers, brands and lenders have raised the bar by offering seamless onboarding journeys, end-to-end digital processes, and instant access to credit in minutes.
While debt instruments give you the freedom to spend money you haven’t yet earned, you need to be very careful not to abuse it. They are a blessing as long as you make timely payments and maintain them prudently. A little misunderstanding and you could find yourself in a debt trap situation.
Relief from spiraling debt
As part of a prudent financial plan, you need to make sure you don’t have multiple debts at once. If you have multiple debts or credits that are spiraling out of control, debt consolidation is your solution.
Debt consolidation is a financial tactic that helps consolidate multiple loans and unpaid credit card bills into a single personal loan. Just be aware of its existing loan foreclosure policies. Using a single personal loan to pay off all dues has a plethora of advantages.
It is rather easy to repay a loan compared to several debts. This reduces the hassle of dealing with multiple lenders and due dates falling on different parts of the monthly calendar. Failure to pay can result in heavy penalties.
Low-Rate Loan Solution
We are well aware of the interest rates that credit cards attract. Not to mention the number of other costs involved. Debt consolidation helps convert all existing debt from 36-45% interest rate to a personal loan at 15-18% interest rate. Wiping out all high-interest debt with just one loan can help save quite a bit of money.
Since servicing a single loan will become a breeze, one due date, one lender to attend, and one EMI to repay, your risk of default will be reduced. Making payments on time definitely improves your credit score. Also, the lower the debts, the better the opinion of your credit profile.
Holding on to debts that you cannot afford can put you in a difficult financial situation. Although debt consolidation can be a temporary relief, it is not a permanent solution to financial problems. Be sure not to use debt securities as an extension of your paycheck and especially not to be enticed by enticing offers and rewards. Always monitor your spending habits and plan your borrowings to maintain your financial health at all times.
Data source – Reserve Bank of India (RBI) data
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