Can merging multiple loans into one benefit you?
There is no arguing about the importance of taking out loans for one reason or another. However, handling multiple loans at the same time can be a hectic task. One has to keep track of them and ensure that their EMIs are timely paid, which is undoubtedly a hassle. Would it not be better if one could consolidate all their existing loans into one account to make the task a lot easier? Well, now you can do that with the help of loan consolidation.
Loan consolidation is the process of combining multiple loans into one loan. You can do this through one of your lenders or by connecting with a third party and asking them to consolidate all your loans into one. Doing so will help one get back on the right financial track and not worry about missing out on a payment anytime soon.
Benefits of Loan Consolidation
Single EMI Payment
The most significant advantage of Loan consolidation is evident for everyone to see, and that is the single EMI payment that one has to make to take care of their dues. All of your loans would be merged into one, ensuring there is no risk of defaulting on the installment, at least due to forgetting about them. Missing out on an EMI can attract heavy penalties, so one must ensure that does not happen.
Lower Rate of Interest
It might come as a surprise, but with Loan consolidation, one may have the opportunity to pay lesser interest in the grand scheme of things, at least to what they are currently on track. Many Loan consolidation companies in the market offer a flat interest rate lower than many of your current loan terms, saving you money in the long run.
Fixed repayment tenure
Loan consolidation is a finance solution that allows one to take out a new loan to eliminate all the other debts under their name. Naturally, this means opting for a new repayment tenure as well. One can easily choose a fixed period between 1 and 5 years for their repayment tenure.
Improved Credit score
If you do a deep dive into your credit report, you will find that creating new credit accounts can have a massive impact on your credit score. Merging your loan accounts into one will boost your credit score as it will close all of your existing credit accounts and open a new one. You might see a temporary dip in your CIBIL score when consolidating your debt, but it will be rectified soon enough.
Consolidation loans also get loans out of default.
If you have defaulted on some of your loan payments, you can take advantage of loan consolidation to get back on track. Loan consolidation is beneficial in situations where forbearance or deferment is not possible.
How to get Loan Consolidation?
The benefits of loan consolidation are there for everyone to see. Sure, it is not an option for everyone, but folks who are experiencing financial hardships or simply want to get rid of the hassle of paying multiple EMIs can benefit from it.
However, the crucial question that needs to be answered is, how can one do just that? How can one go ahead with their loan consolidation?
1. Check your credit score.
The first thing you need to do is take a look at your credit score before connecting with a lender. If you have a good credit score, somewhere over the 700 mark, you will surely get speedy approval of your application. In addition, you would also find attractive interest rates and other terms for your loan consolidation.
It would be best to look at your credit report for any errors, as they could hurt your credit score.
2. List your debts and repayment.
You are not required to consolidate all your existing loans and debts into one; the choice is up to you. However, before taking any steps in this direction, you must list all your debts and their repayment schedule to get a clear picture of your financial situation. Doing so will allow you to have a clearer picture and empower you to make more accurate decisions regarding your debt consolidation.
3. Compare loan options
Once you have completed the above-listed steps, the next part of the process is connecting with lenders offering loan consolidation services. It is vital that you connect with as many reputable lending institutions as possible and compare the schemes that are provided to you. Do not sign up with a shady lender just because they offer an attractive scheme.
4. Apply for a loan
After deciding on the loan scheme that is advantageous to you, you only need to apply for the same. The procedure for the loan application is just like any other. However, you might need to add documents that refer to current existing loans.
5. Close the loans
Once your loan application is approved, the only thing you need to close the existing loans. In most cases, the lenders would offer a direct payment method to disburse the loan amount to your current creditors and pay off your old debts. But if that is not the case, you would have to close your debts manually. Do this immediately if you want to avoid incurring further interest on your loans.