Essentially, combining multiple debts into one single loan means less burden for the borrower. So, debt consolidation can be the perfect solution to one’s monthly financial stress. Hence, it is wise to learn everything there is to know about debt consolidation loans.
This article discusses aspects, types, and the application method of debt consolidation.
What is a debt consolidation loan?
Debt consolidation is applying for a new loan to release the financial burden from consumer debts and other liabilities. With a debt consolidation loan, individuals can opt to make only one monthly payment instead of multiple monthly debt payments.
What are the features of debt consolidation?
The features of debt consolidation are as follows:
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Pay multiple debts simultaneously
In debt consolidation, lenders settle borrowers’ multiple ongoing debts so that borrowers make only one monthly payment, i.e., to financial lenders.
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Simple repayments
Since a consolidation loan combines multiple repayments into one, it simplifies the entire repayment process for borrowers. This means borrowers need only to make a single payment every month, which significantly lowers the risks of credit defaults.
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Improve credit score
Debt consolidation helps enhance the borrowers’ credit scores in many ways. This, in turn, increases the chance of getting fast approvals in the future.
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Quick approval
Debt consolidation loans are approved as soon as the lenders have verified and approved the borrowers’ documents and applications.
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Flexible loan amount and repayment tenor
Borrowers can customise the loan amount according to their needs and choose a repayment tenor according to their financial strength.
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Competitive interest rates
Typically, in the long run, debt consolidation loans have a lower interest rate than other loans. Additionally, borrowers can negotiate interest charges based on their CIBIL score.
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Prepayment facility
Lenders allow borrowers to make prepayments for their consolidation loan. It helps lessen their financial burdens and pay off the loan quicker.
When to apply for a debt consolidation loan?
Factors to determine if and when to apply for a consolidation loan:
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If the debt amount is huge
Consolidation loans can be an ideal option for those individuals who have multiple huge debts and are struggling to repay them.
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If debts hamper revenue flow
Individuals with numerous debts may face issues with a steady capital flow. Debt consolidation is ideal for them to pay off their dues quickly and get back a steady money flow.
What are the types of debt consolidation?
There are 2 types of debt consolidation:
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Via secured loans
Individuals can consolidate their older debts into one loan by opting for a LAP, home loan, gold loan, etc. Many NBFCs provide loan against property for debt consolidation purposes at flexible repayment terms.
Benefits of choosing a secured loan like LAP are not only the competitive interest rates on loan against property but also the high-value loan sanction and longer repayment tenor.
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Via unsecured loans
Unsecured loans are the ideal choice for individuals who do not want to pledge collateral against the loan. One can opt for such loans and free themselves from long-term financial burdens.
What are the eligibility criteria to apply for a LAP for debt consolidation?
Applicants must meet the following criteria:
Salaried individuals
- Nationality – Indian
- Age – 28 to 58 years
- CIBIL Score – 750 or higher
- Occupation – Employed in an organisation/MNC for over 3 years
Self-employed individuals
- Nationality – Indian
- Age – 25 to 70 years
- CIBIL Score – 750 or higher
- Occupation – 5 years or more of business with present enterprise
What are the necessary documents to apply for a LAP for debt consolidation?
In order to opt for this credit facility, one has to produce the following loan against property documents:
Salaried applicants
- Employer-issued ID card
- Past 3 months’ payslips
- ITRs
- Property title deed
Self-employed applicants
- Business ownership documents
- Past 6 months’ bank statements, balance sheets, etc.
- ITRs
- Property title deed
How to apply for a LAP for debt consolidation?
Please read the following steps:
Step 1: Open the loan against property application form on the website of the preferred lending institution.
Step 2: Enter personal, employment, and contact information.
Step 3: Enter property details.
Step 4: Submit the form.
Many lending institutions provide pre-approved home loans, loan against property, etc. Eligible consumers can check their pre-approved offers by providing their necessary details on the lender’s website.
So borrowers may opt for a secured debt consolidation loan and put a swift end to their multiple repayment burdens.
Many financial institutions provide pre-approved home loans, loan against property, and other types of loans. Individuals can check their pre-approved offers by entering the requisite information.
Even after discussing everything and understanding what is the mortgage loan process, individuals must do their due diligent research before applying for one.
Mortgage loans refer to a secured loan sanctioned against an immovable asset. It is a popular loan option amongst borrowers as it has a long repayment tenor and competitive interest rates. Read on to know what is the mortgage loan process and how an individual can opt for this credit facility.
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