Benefits of Debt Consolidation Loan
The following are the benefits of a debt consolidation loan:
- Simplified Finances: Instead of keeping track of various payments with different due dates, you only need to focus on a single monthly payment.
- Lower Interest Rates: Deb consolidation loans often have lower interest rates than high-interest debts like credit card balances.
- Fixed Payment Terms: These loans typically come with fixed repayment schedules, which means consistent monthly payments.
- Improved Credit Score: By consolidating debts and making timely payments, you can improve your credit score. Regular payments on a consolidation loan can demonstrate financial responsibility to credit bureaus.
Documentation & Eligibility for Debt Consolidation
The following are the documentation requirements for Debt Consolidation:
| Identity Proof | Address Proof | Repayment Ability Documents |
- Aadhar card
- Voter's ID
- Valid Passport
- Driver's license
| - Last three months' utility bills
- Aadhar card
- Voter's ID
- Any other relevant documents
| - Recent salary receipts
- Audited balance sheet and P&L account
- Any other documents supporting income
|
What are the Interest Rates for Debt Consolidation Loans?
Interest rates for debt consolidation loans usually vary between approximately 6% and 36%. Securing an interest rate towards the lower end of this spectrum typically requires a high credit score, specifically in the range of 720 to 850.
How to Apply for a Debt Consolidation Personal Loan?
Here are the basic steps to apply for a debt consolidation personal loan.
- You can apply for a debt consolidation loan via Pluto Money's website or app.
- Once you provide all the basic information, a representative will contact you.
- You will be assisted with uploading/sharing your documents with the respective bank.
- Moreover, you will be assisted with completing the verification process.
- As your documents are verified, the loan will be transferred to your bank account.
Things to Consider While Taking a Debt Consolidation Loan
Following are the things to consider while consolidating debt.
- Overall Financial Impact: Assess whether consolidating will save you money. Consider the interest rate and the new loan term compared to your current debts.
- Interest Rates: Compare the consolidation loan's interest rate with your existing debts. The goal should be to secure a lower overall interest rate.
- Loan Terms: Look at the repayment period. Longer terms might lower your monthly payments but could result in higher total interest paid over time.
Fees and Charges: Be aware of any origination fees, balance transfer fees, or early repayment penalties associated with the consolidation loan.
FAQs
What is a debt consolidation loan?A debt consolidation loan is used to pay off multiple debts, combining them into a single loan with one monthly payment, often with a lower overall interest rate.
How long does it take to get a debt consolidation loan?The time to get a debt consolidation loan varies, typically from a few days to a few weeks, depending on the lender and the borrower's financial situation.
How much can I borrow with a debt consolidation loan?The amount you can borrow with a debt consolidation loan depends on your creditworthiness and income, with limits varying widely between lenders.
Is it a good idea to consolidate your debt with a loan?Consolidating debt with a loan can be a good idea if it reduces your interest rate, simplifies your payments, and aligns with your financial goals. Still, it requires careful consideration of your financial situation.