The best time to take help of debt consolidation loans is when you have several small loans to pay off at the earliest. Smaller loans having varying rates of interest and paying them at different times of the month is extremely confusing. Not only is it confusing but also very financially exhausting and draining too because you need to constantly keep a tab on the dates when to pay the loan. To cut through all this confusion and the different rate of interest at which you need to pay off, it is important to assemble all the small loans together and opt for a debt consolidation loan. There are several ways how a debt consolidation loan can help you swim through the troubled waters of financial crisis. Are you wondering why the craze to opt for debt consolidation loan? Well, there is no need to put on the thinking cap because we are here to tell you why this loan plan is your go to option in case of debts.
- Lower Amount of Repayments – Several small loans put together along with their respective rate of interest makes you pay up a large sum of money on a monthly basis. This does not help your financial standpoint but in turn exhausts your bank balance all the more. A single loan with a fixed rate of interest ensures that you pay less on the monthly basis and also increases your scope for negotiation to cut down on the high interest rate. This approach not only helps you to have a heavy flow of cash in your savings account but also regularises your loan repayment procedure. This regularity comes in the form of paying just a fixed amount every month. A smaller amount indicates a higher scope to pay it off every month.
- Easy to Manage Debt Consolidation Loans – Several small loans along with its different rates of interest is very difficult to manage. It does not end here, because you have different timings set throughout the month to pay them off and this cycle repeats month after month till the time you are debt free. Having one big loan is a very easy way to manage the debts in a routine manner and not stay confused. Not just that, there are several debt consolidation companies who help you in doing the same and choosing a debt consolidation plan that works best for you to solve the financial crisis that you are suffering from. In spite of having direct debits, having money in your account that can cover the various payments at different times of the month can make life very complicated. To make matters worse, in case you are not able to pay a single installment in the month, then penalty charges are high and the interest also shoots up. So much just for missing one installment is not worth it and plus it also pushes you back one step in your attempt to come out of this financial loop hole which you are in.
- Lower Scope of Dishonour Fees – This is one point that is very closely related to the previous point where we focused on the ease of managing a debt consolidation loan when compared to availing multiple small loans. By having several small loans, you are only increasing your risk of failing to repay the loan within the set date. Failing to pay off at the right time implies that you need to pay the dishonour fees along with the penalty interest. Not repaying the loan on time badly affects your credit report. Affecting your credit report is detrimental because it hampers your future chances of getting a loan. Creditors always check the credit report before lending a loan and a bad remark there is not the right thing that you would want.
- Scope to Increase Savings – One of the biggest perks of availing the debt consolidation loan is the fact that they give you ample scope to increase your savings. Having to pay a small amount of loan on a monthly basis implies that you have the scope to increase your savings account. Having sufficient money as savings helps you to have the right support financially. This financial support goes a long way in avoiding any such financial crisis that might come up in the future. People focus a lot on savings account primarily to avoid any such financial crunch that life might throw at you. This is the only reason for financial advisors to vouch for debt consolidation loan because it not only helps you to repay but at the same time lets people to save as well.
It is considered that the debt consolidation plan sets things right and allows people to come on the right track of striking the perfect balance between savings and repaying the installment.
