Due to the economic crisis triggered off by the outbreak of COVID19 pandemic, loan repayments have become difficult for many people Under our series of managing personal finances during the #MoneySecureFromCorona here we will discuss how you can manage costly loan with high interest rates with one personal loan The costly loans can be converted into one personal loan with lower interest rates. This is also called debt consolidation personal loan This helps you get rid of costly loan, focus on one loan and reduce financial pressure from numerous costly outstanding loans besides reducing cashflow problems and preventing a negative impact on credit scores Debt consolidation personal loan helps you consolidate different costly loan into one loan It helps you focus on repaying just one loan This is very helpful in times of pay cut, no pay hikes or job loss This also helps you protect your credit score which helps you in retaining access to future loans All leading banks provide debt consolidation personal loans There are other loan providers who provide such loans You can get debt consolidation personal loan upto Rs 20-25 lakh The term of such loans can range between 24-60 months Interest rate can be 11-24% p.a.
If you get a lower rate, then opt for it It can even go upto 36% p.a. but remember, such loans work for you only if the interest rate is substantially lower than that of existing outstanding loans such as outstanding amounts for credit cards You can apply for such loans online and you also have online providers of such loans Here, you don't have to give a guarantee in terms of a collateral for the loan Check for prepayment facility of these personal loans without any penal charges The distinguishing feature of the loan is the speedy disbursal that typically takes place When you take a debt consolidation personal loan, you need to check out your age. More advanced the age, greater the hesitation of the lending institution The other is the existence of regular income since without a regular income repayment of the personal loan becomes questionable The next important factor is the time or term left for the outstanding loans. If they end in 2-3 months, there's little point for these loans. However, if it is 1-5 years left, such loans make sense Apart from interest rate being less, there should be flexibility in the tenure or terms of such personal loans so that you get the personal loan term you need A longer term makes the loan burden go for long and a shorter tenure makes the EMI burden difficult to manage The reason for taking such a loan is that your interest burden reduces and second, there is lesser pressure on your budget You also need to have an appropriate credit score to help you become eligible for the personal loan If you are already having difficulty in making loan repayments and have spoiled your credit history and credit score due to defaults, another application for personal loan will get into trouble In such cases, the persona loan route doesn't work but you need loan against assets like loan against FD, loan against gold or gold loan and loan against property or LAP Of course, the loan disbursal will take more time Though the interest rate may well be lower The key to taking such a personal loan is to ensure that there is no additional pressure on your budget and all your outstanding loans should not be more than 50% of your take home pay For a debt consolidation personal loan to truly work you need a debt repayment plan If the need be, go for credit counselling and get guidance on managing expenses One major utility of debt consolidation personal loan is that it consolidates outstanding balance payment accumulated for different credit cards This helps you stay focussed on one loan and don't have spend time and energy on tracking different loans