When Should You Use a Personal Loan for Debt Consolidation?
If your total debt from loans and credit cards is getting out of hand, you may be exploring debt consolidation loans in India to help you pay it down. You’re probably also wondering whether this is a good option or not. Will it work for you or just end up adding to your debt burden?
There are a few situations in which instant debt consolidation loans make sense. Here’s when you should consider them:
- You Have a Repayment Strategy – Before taking a debt or credit card consolidation loan, make sure you have a plan for paying it off. After all, you don’t want it adding to your loan burden rather than helping you reduce it.Take a close look at your budget and basic monthly expenses, as well as your total debt. Figure out how much you will need to pay towards the loan every month, and for how long. If you can’t make this payment, you may be tempted to use your credit cards for it!
- Your Spending Is Under Control – It makes no sense to clear your credit card balances if you’re just going to put more purchases on them. This leads you into a debt cycle, especially if you have other loans that also need to be paid.If you have large debt, consolidation can help you reduce it quickly and even pay it off in full. However, if your debt and spending are out of control, you could end up struggling to pay yet another loan. Cut spending to the bare minimum till you’re debt-free.
- You’ve Found Affordable Loans – Making EMI and credit card payments on time reflects well on your credit history, even if your debt is high. With a good credit score, you are likely to get low interest rates on debt consolidation loans.When you’re considering a debt consolidation loan, instant approval and cheap interest rates are the most important factors. Shop around to find low-interest loans, and apply for these only if they charge less than your current loans and credit cards!
- Your Credit Card Debt Is High – Credit cards tend to have much higher interest rates than personal loans. If you have racked up a huge balance on one or more cards, it makes sense to pay off this balance with a loan that’s not as costly.Remember, your credit card debt will keep accumulating interest the longer it remains unpaid. Over time, this can add up significantly. Using a credit card consolidation loan to pay down this debt can help you reduce the interest you’re paying in the long run.
You don’t need instant debt consolidation loans if your debt isn’t too high and you can pay it off in a few months. But they can be very helpful if you cannot manage your current debt burden, and high interest is adding to it.