Debt consolidation is a financial means for borrowers to` avail of a significant loan amount to close their other ongoing debts. It is quite common for individuals to clear short-term debts such as multiple credit card bills and consumer debts, to manage their existing credit obligations that accrue high interest. It also makes it substantially easier for individuals to take new financial investments or apply for more pressing loans that they may need urgently.
Debt consolidation through a loan against property opens a new credit line by mortgaging one's property. It offers adequate capital to repay numerous liabilities through just one instalment each month. This essentially means that larger debts can be effectively cleared from a single loan source. Since this type of loan is availed by pledging a property as collateral, the principal secured is a sizeable amount and the repayment tenors stretch longer, making it easier to pay the EMIs.
Multiple credit obligations are likely to incur more interest as each one is charged separately. Loan against property debt consolidation is available at lower rates of interest, which helps keep the total payable amount within a reasonable range.
Keep the following pointers in mind when you wish to consolidate your current debts:
Assess your total outstanding debt so you can gauge the exact amount you need through your loan against property sanction to adequately close all other ongoing loan accounts.
Once you establish the required loan amount, you need to pick the best loan type based on interest rates, tenor and loan amount. Some of the popular forms of debt consolidation methods are:
When you consolidate your debts, you have the option to choose from either secured or unsecured loan. In the case of a loan against property, you get a secured loan that guarantees a higher loan sum and a long tenor for making repayments against the pledged collateral. The loan against property interest rate is competitive and stands to give you a chance to repay your loan without stretching your finances thin.
Personal loans offer unsecured loan with no end-usage restriction, making them good debt consolidation tools, when repaying debts of smaller sums of money. Most financial companies offer adequately large loan amounts to cover every debt consolidation expense.
A top-up loan is usually given to existing customers along with their home loans, providing a secured credit alternative. The terms usually depend on your loan repayment capacity and property value among other factors.
This is an overdraft facility set against the value of your securities. It is suitable for those with significant long-term investments in the form of shares, equity mutual funds, insurance policies and the like. These can be utilised for low-cost funds.
A good credit score will always stand you in good stead. It will fetch you customised loan facilities at competitive rates and terms.
Debt consolidation saves you the hassle of tracking multiple payments, EMIs, due dates, and so on. There are many financial institutions that offer property loans for debt consolidation. Choose the one that suits your requirement and repayment capacity. With no limitations on end-use, LAP can be the right way to consolidate debts, when you seek to manage high-value liabilities.
Disclaimer: This article was published in association with Bajaj Housing Finance Limited and not created by TNM Editorial.