Being debt-free gives a sense of satisfaction and peace of mind, second to none. Overdue payment on loans and credit card dues can be a cause of great mental agony. At the same time, it can dent your credit score. While there are several ways to pay off debts, availing a personal loan for the same can be a viable solution to get the debt burden off your shoulder quickly. Read on to know more.
Pay all outstanding loan amounts with a personal loan
Today, there is a myriad of loans available in the market including home loan, car loan, loan against property, etc. For each loan taken, you need to pay a monthly EMI. On payment of each EMI, the outstanding loan amount decreases.
Instead of paying multiple EMIs every month, you can avail a big-ticket personal loan and use it to pay off the outstanding balance of the other loans. This serves twin benefits:
- All your loans are paid off faster
- You need to pay a single EMI, which helps in the effective management of your finances in the long run
Let’s understand this with a numerical example. Suppose you are serving a home loan of Rs. 20 lakh and a car loan of Rs. 5 lakh for 20 years and 5 years respectively. The rate of interest is 10% and 8%. The EMIs for both are a little over Rs. 29,000 every month.
Now, if you avail a personal loan of Rs. 25 lakh for a period of 5 years at a 10% interest rate, your monthly EMIs come to a little over Rs. 53,000. However, note that instead of serving two different EMIs for a combined tenor of 25 years, you need to pay EMIs only for 5 years, thus making significant savings on interest payment.
Avail a big loan amount
What makes personal loan a prudent instrument to clear your overdue payments is the fact that you can avail a large loan amount. Also, being an unsecured loan, there’s no need for any collateral. For instance, Personal Loan from top NBFCs offers a loan amount up to Rs. 25 lakh. Also, this new-age personal loan comes with a Flexi Loan facility that allows you to borrow from your approved loan limit as and when required without having to make multiple applications.
Interest is charged only the amount utilised and not on the entire limit, thus lowering your EMIs to a great extent. Thus, this debt consolidation loan not only helps you to pay off all the existing dues quickly, but also avail funds for any unexpected needs.
Things to watch out for
While a personal loan can come in handy to repay all your debts quickly, there are certain things to watch out for, while availing it. First, it’s important to compare offerings from multiple lenders and zero-in on the one that best suits your needs. Since, personal loan is an unsecured one, the rate of interest is on the higher side. Also, before applying for this loan, do check your credit score.
A high score, above 750, can help you avail the loan at favourable terms and conditions. You can check your score for free from the credit information companies (CICs) in India or a third-party website by entering your name, PAN, mobile number and date of birth.
