Dangers of Debt Consolidation

No one feels good when they have debt. Debt makes people helpless and irritable. They limit how much you can save each money for a long time, depending on your loan tenure. And if you have multiple debts, you need help. This help comes in the form of debt consolidation.

Debt consolidation lowers your monthly payments, interest rate and makes repaying loans simple. However, even debt consolidation is not a risk-free option.

To make sure debt consolidation does not make your life worse, you need to understand its dangers before you make a choice. Below given are the four major risks one can face with Debt Consolidation.

You could fall deeper into debt: Your first priority is to pay back your current debts and to ensure you don’t fall deeper into debt. However, with Debt Consolidation, there is the risk of just that.

Let’s say you take a personal loan and a balance transfer to repay current debts. This frees up your burdened cards, which means you’ll have a lot of available credit on those cards. However, if you start using those cards again, you’ll soon be having a debt on your debt consolidation loan. Thus, this is where you need to tread lightly.

Further, don’t go into debt consolidation before you have a plan to avoid overspending. Create a budget and stick to it. Create an emergency fund too and seriously decide not to use your credit cards to make new purchases.

You may end up paying more in interest: You take debt consolidation to lower your interest rate, right? Now, a balance transfer credit card or a personal loan can give you 0% for a few months, giving you much lower interest rates than all of your current credit card debts.

However, at the end of the day, your interest rate is not the only thing in your interest to be paid. Your tenure for debt repayment has a big role to pay as well in counting towards the interest rate.

You can take a debt consolidation and lower down your monthly payments by extending your tenure, but then your total costs shall be even more since you’ll be paying over a longer period of time.

If you want to avoid this, consider making your monthly payments, or more than that if you can manage, to repay your debt faster. But do make sure you don’t incur any prepayment charges.

There are consolidation scams: Unfortunately, there are some unscrupulous lenders who are in the market only to find customers who are in grave financial difficulty. The problem is that these loans are not good for your finances.
You’ll have to deal with high interest, longer tenures and various other unfavourable terms. And if you miss a payment, you’ll have to deal with exorbitant penalties.

5 Best Debt Consolidation Funds in India in 2021

Managing multiple debts can be a huge headache. You have to oversee the various debt accounts to keep updated. Managing multiple debts can take a toll on your health and finance alike. Each of such debts has their separate EMI payment schedules and interest rates. It can overwhelm you in a hurry.

So why go through all these problems, when there is a way out?

All you need to do is to take one single loan to consolidate all the rest. When you take a single debt consolidation loan, you make it simple and easy on yourself to make all monthly payments. It also gets easier to pay off the interest faster since the interest rate of all the debts together is lower. In other words, you lose less money and save more, especially when you can pay back faster. By debt consolidation, you may get the chance to make one simple monthly payment for all debts in one place. How cool is that?

Another great thing about this is that debt consolidation allows you to repay any loan type. Thus, it is flexible as well. Because of this, it pays to choose your personal loan for consolidation. Doing so saves you money which you would otherwise have to pay on interest. Early payoff fees, finance charges, and minimum credit score.

In this article, you will see some of the best loans for debt consolidation.

But first, we have to learn about…

Benefits of debt consolidation

• For many people, this is one of the ways to save considerable money on monthly payments, loan interest and other charges. Since these are charged separately for all different debts, the overall money you need to pay is more. But when debt consolidation comes, all these debts are consolidated in one single fund, and so all charges are comparatively less. Debts therefore are easier to pay off, which helps to improve your credit score as well.
• If you have several debts with a high interest rate, you can easily save on this interest by getting a lower rate at a debt consolidation fund. Credit card tariffs are considerably lower as well, so you can save money here as well.
• If you choose a longer term or tenure for the debt consolidation loan repayment, you won’t miss payments. You will be paying more overall, or in total, by you’ll find the monthly payments will be easier to make. This is because such funds reduce your monthly payments. However, it does not change the interest.
• With a debt consolidation fund, your credit score will soar, when you pay back on time. This can un-do past damage as well.

5 Tips To Know Before Getting Loans In 2021

It may not be easy anymore to get a loan. Lenders are becoming stricter, especially due to the current economic conditions. And yet, people’s difficulties and therefore their desire for loans are increasing.

One may need a loan for just about anything. It can be for children’s education, debt consolidation, marriage, car purchase, property purchase, equipment purchase, and more. It can be anything, and yet the fact remains that there is a great demand for loan right now. You may need money urgently, but lenders may not want to give you anything, for any reason.

To increase your chances of getting loans, here are a few tips:

• Check the loan eligibility before applying: Here’s a big mistake many people make. They don’t see the lender’s eligibility criteria and apply for the loan. Some understand that they are not eligible, but apply anyway just to get a chance, which never comes by the way. It is simple. If you do not meet the criteria, you don’t get the money. Worse, it can harm your credit score too due to a loan enquiry and denial.
• Check your credit score before applying: Lenders want your credit score beyond a certain level, without which your loan application stands to be denied. Your credit score is a measure of your credit worthiness and how trustworthy you are in repaying credit. Your credit is important as it is based on previous loans, income, assets, repayment behaviors, and more. The score needs to be at least 700 to be considered.
• Don’t apply for too many loans at once: This is another big mistake people make in their desperation to get emergency money. They apply at too many places at the same time. This, however, lowers your credit score, and banks can even deny you loans if they come to know you are asking at multiple places.
• Multiple applications mean multiple rejections, since it signifies lack of ability to repay the loan and lack of confidence. The best thing to do is to research about a few lenders and pick the one who suits you most.
• Correct errors in your credit report: You can see your credit report free once a year, and the cost afterwards is negligible. Studying the report will let you come across any mistakes. Mistakes and misstatements affect your credit score, and therefore many things in your life. Therefore, take your time to study the report. If you find mistakes, inform the concerned credit bureau. It’ll correct your report.
  

In case of rejection, don’t apply before 6 months: This is a common mistake as well. Right after a loan application rejection, people apply for another. The problem? It lowers your credit score, which in turn makes it harder for you to get credit later on.

Debt-Free Year - 3 Steps to Have a Debt-Free Year

New Year is a time for making resolutions, decisions and for reflecting on the things in your life. Every year, countless numbers of people in India resolve, at the year’s beginning, to pay off their debt. However, very few of them actually do that.

By February, the enthusiasm you had in January may most likely wear off. This will be faster if your plan was too complex or too flimsy. In these cases, without a concrete plan, your plan shall fizzle out and finally be forgotten.

Instead, try out this plan. Complete the first two steps and you get to choose a payoff method in step three, which shall carry you through for the rest of the year.

1. Know your debts: It might sound scary, but you do need to know your debts, or the money you owe to people or agencies. Besides, you do need an honest evaluation of your debt. Also, you only need to do this just once.
2. Fund your debt accounts: Now that you know what debts you have, it is time to become free of them. To do that, there are a few sub steps. First of all, you need to calculate your monthly expenses, including what you need to create your emergency fund. Now, subtract that amount from your monthly income. This shall give you the funds you can dedicate towards eliminating debt.To make real progress, you need to do two things. Firstly, you need to earn a bit more, which you easily can by cutting off excess expenses, selling old electronics and even your cable connection. All this might not be fun to do, but remember that doing these shall help you a lot in settling your debts.
   
   Find a repayment strategy and stick to it: There are so many ways to fall into the debt trap, but just two ways to climb out of it. These strategies are the Debt Avalanche and the Debt Snowball. These depend on your preferences for persistence and instant gratification.
   
   
3. Debt Avalanche strategy can be used if you want results fast, but it can feel slow in the beginning. In this strategy, you pay off those debts with the highest interest first. Over time, this strategy saves you thousands. The only problem is that it takes time to get the first debt to be settled.

Debt Snowball is the strategy in which you get rewards upfront. In this, you focus on the smaller debts first. Since these get over faster, you get more motivation to keep continuing. You focus on the smaller debts first, no matter what the interest rates are. The catch is that this process takes longer and costs more in interest.
You can supplement either strategy with the strategy called Debt Snowflakes. In this strategy, you put small savings for your goals.

Debt Consolidation - 4 Tips for Effective Debt Consolidation

Did you know that people who take debt consolidation loans to pay off credit card debts actually end up with even more debt at year end? Did you know that it is one of the top reasons for the increasing stress levels in people nowadays? That is true as well, since people who take such loans remain with more stress than before taking them.

However, some people do have the good sense and a bit of luck to turn around their situation for good after taking debt consolidation loans. For instance, there are many examples of people learning from their mistakes and dumping their credit cards to avoid falling into debt again and again. Credit cards are of course useful, and doubly so when you can use them to get loans at 0% interest. However, things do not always go your way, and one credit card debt can be devastating.

Cons of Consolidation Loans

There have been way too many cases of people taking consolidation loans to take care of their credit card debt, only to fall deeper into debt trap by the end of the year. Many “manage” to double what debt they had previously. It is rightly called a Debt Trap because you end up with a huge debt but with no providers due to your low credit score. And how do you end up with a low credit score? By being continuously unable to repay your loans.

The second form of risk from consolidation loans come from the type of loans you use. In the case of unsecured personal loans, the rate may be lower or higher. It can range from 3% to 36%, and depends on your credit score and on the lender. It depends on your debt-to-income ratio too. If you have a good credit score, you can get a lower interest rate, but with a high debt level, the amount you can borrow can be limited.

The third way to consolidate your debt is by taking a secured loan. These have lower interest rates but the risk of losing your collateral is still there.

The fourth way to get a consolidation loan is by drawing money from your retirement account. It is risky as well since the balance can be penalized and taxed as withdrawal if you can’t repay the loan.

4 steps of doing debt consolidation the right way

Assess your situation objectively: You know you need to see a credit counselor and bankruptcy attorney if your medical bills and debt repayments take up more than half of your income. It is unlikely that you can pay off the debt within 5 years. However, you are likely to qualify for faster filing which can enable you to erase consumer debt within 3 to 4 months.

 Try not to take high-cost loans: Thinking about taking a loan? Think about these things first: the amount of monthly payments, the number of payments and other fees to be given. Then compare that with what you are paying now.

Choose the shortest possible loan term: To ensure that you pay the minimum interest, keep the loan to 3 years, and 5 years maximum.

Close off your cards: Perhaps the best way to get out of debt and stay out of it is to throw off your credit cards. This may cost you a bit, but at least you won’t be in debt anymore.

 

5 Best Debt Consolidation Funds in India in 2020

 All you need to do is to take one single loan to consolidate all the rest. When you take a single debt consolidation loan, you make it simple and easy on yourself to make all monthly payments. It also gets easier to pay off the interest faster since the interest rate of all the debts together is lower. In other words, you lose less money and save more, especially when you can pay back faster. By debt consolidation, you may get the chance to make one simple monthly payment for all debts in one place. How cool is that?

Another great thing about this is that debt consolidation allows you to repay any loan type. Thus, it is flexible as well. Because of this, it pays to choose your personal loan for consolidation. Doing so saves you money which you would otherwise have to pay on interest. Early payoff fees, finance charges, and minimum credit score.

In this article, you will see some of the best loans for debt consolidation.

But first, we have to learn about…
Benefits of debt consolidation

    For many people, this is one of the ways to save considerable money on monthly payments, loan interest and other charges. Since these are charged separately for all different debts, the overall money you need to pay is more. But when debt consolidation comes, all these debts are consolidated in one single fund, and so all charges are comparatively less. Debts therefore are easier to pay off, which helps to improve your credit score as well.

    If you have several debts with a high interest rate, you can easily save on this interest by getting a lower rate at a debt consolidation fund. Credit card tariffs are considerably lower as well, so you can save money here as well.

    If you choose a longer term or tenure for the debt consolidation loan repayment, you won’t miss payments.  You will be paying more overall, or in total, by you’ll find the monthly payments will be easier to make. This is because such funds reduce your monthly payments. However, it does not change the interest.

    With a debt consolidation fund, your credit score will soar, when you pay back on time. This can un-do past damage as well.