Personal loans affecting debt consolidation

If you facing pending dues on various credit cards that are charging you a high rate of interest, furthermore an existing high-interest personal loan. In such a situation, it will positively help in consolidating the debt into one personal loan. To start the procedure, try to get a fresh personal loan from a bank that offers a very low-interest rate. The reason behind this loan is to repay the credit card dues/other outstanding debts that you are facing at a high-interest cost. Furthermore make sure that the newly acquired loan has various positive beneficial features like a flexible repayment plan (tenure), No-prepayment charges, and No foreclosure charges. This will make the process much easier and smoother for you.

Benefits attached to debt consolidation using a personal loan

There are various benefits of using a personal loan to consolidate debt, some of them are as under:-

Minimizing interest rate:

Personal loans come with less interest rates than other types of debt. If you can get a low-interest personal loan with a very minimal interest rate, you’ll save money on loan repayment.

Fix rate Consolidation Loan

Normally interest rate keeps on changing. Because of its linkage with the financial index. If the index rate goes up, your rate usually goes up too. Just in case this option does not sound good then you can opt for a fixed-rate consolidation loan so that you can easily assess exactly what your monthly installment will be.

Fixed repayment timeline

While acquiring a personal loan, you present a deed to return or repay that loan on a pre-settled schedule addressed in your loan agreement. Now you will exactly know when you’ll become debt-free if you keep paying on time. Be aware that earlier clearance of a loan might result in the form of an earlier payment penalty from your lender.

Increasing your credit

Your credit Scores are depending on numerous factors, each with a different impact. If you failed to pay your credit cards in pre-settled time, that will negatively affect your payment history, which is a critical factor. If you utilize your card up to the maximum limit, that will again hurt your credit utilization rate. A lower utilization rate will affect in a positive way. So, consolidating your pending loan with a personal loan will enhance your credit scores if it leads to a lower credit utilization rate and more on-time payments.

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