28 DECEMBER, 2021

The convenience of borrowing money can solve many problems. You can avail loans to buy a house, car or bike. You can also choose this loan offering to fund your wedding or travel plans. And, as these loans have flexible tenures, you need not stress about repaying them together. However, if you take multiple loans to fulfil your needs, managing them can get challenging. You might face problems in keeping a track of all the due dates and even miss out on payments. Moreover, the combined interest outgo can empty your pockets. A better solution is a consolidation of debts.

Instead of servicing multiple debts with multiple interest rates and due dates, you can take one loan to pay for all of them. Experts believe that a personal loan is best for this purpose. Here is why!

Why Is a Personal Loan the Best Choice for Debt Consolidation?

  • No collateral

You can opt for a personal loan without furnishing any collateral. This facility makes the process easier and faster. You can get the loan amount at attractive interest rates and consolidate all your debts into one without keeping your assets at stake.

  • Facilitates uniformity

With one personal loan, you can repay all the multiple loans effortlessly. You can club multiple EMIs into one and pay one uniform interest rate. It saves you from the hassle of tracking multiple debts and remembering their respective interest rates.

  • Quick solution

You need not furnish complicated paperwork or wait for months to get the approval of a personal loan. Personal loans are approved quickly as all you need is to fill the application form and furnish the minimum documents. The processing time is fast and can help you repay the urgent debts without a delay, avoiding any default. Also, you can get a personal loan online from the comforts of your house without the need to visit the lender's branch.

  • Better credit score

Often people use their credit cards to pay their debts not knowing that it is an expensive means. Credit cards have higher interest rates, and you could max out your card, hurting your credit utilisation ratio. In addition, non-payment of credit card dues can hamper your credit score. Instead, a personal loan has a lower interest rate and is available for a higher amount. You can improve your credit score by repaying all the debts with a personal loan.

Bottom line

A personal loan can be a convenient means to consolidate your debts and be debt-free faster. However, you must ensure that you take a suitable tenure by availing the loan. A longer tenure could unnecessarily increase your interest cost and push you into deeper debt. Also, you must consider the charges to be paid for taking a personal loan. It would be best to research the various options and opt for a loan that has favourable terms, lower interest rates than the current debt. Also, make sure to compute your EMI using a personal loan EMI calculator. Don’t forget to read the terms and conditions carefully to uncover any hidden charges.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.