Imagine you have several loans to pay off each month like housing loan, student loan, health loan, car loan or any other loan. This becomes tough to manage to remember how much and which one to pay when. And this increases the probability of delay in payments. Sometimes due to other relevant expenses, we fail to pay the debt in time. These all are few problems that we all face in our ongoing life. So to escape from this situation system of “debt consolidation” is being designed. There are financial institutions which easily provide one with debt consolidation plan as per need. Like banks, lenders and credit union
In debt consolidation, one pays off single loan merging all other small loans in just single one. It’s an easy fix for your debt paying problem. Having a debt consolidation can bring an extra edge for you. Here are some of them
AVAILS OF DEBT CONSOLIDATION
The first and most important benefit of consolidation program is saving. While paying different loans one has to go through the various percentage of interest rate. That can wave your head around. Unification of your credits not only decreases your interest rate but it also deducts your taxes. That saves your pocket from the extra interest rate.
EASIER TO MANAGE-
Aside from saving fusion of loans makes it evident for the payer. It becomes a much smoother process. As a person now don’t have to indulge in lots of paperwork. Above all its saves the most precious thing-time. In short, its management becomes easier and saves one’s hours from spending loan payments.
IMPROVES CREDIT SCORE-
Because of having sets of loan EMI’s or credit cards bill if often make you late for payments. And due to that credit score automatically decreases. If you merge all your debts. into a single one, it will be much easier to gain your credit score. That will also make your image clear and respectable in front of everyone.
LIMITATIONS OF DEBT CONSOLIDATION
Consolidation providing institutions some time charge high fees and same interest rate to your original rate of the loan. That is very close to your main bill. This makes paying your debts more difficult than before. Indirectly less benefit.
SEEMS YOU EASY-
From far consolidation seems very charming and perfect pack for you. That can solve your problem of delayed payments. But I rather say think before taking and consolidation program. Maybe this is not the thing for you. Because merging your debts into one doesn’t solve your burden it just simply it a little
Majorly there are two types first is secured debt consolidation and unsecured debt consolidations. Both with some advantages and disadvantages. The secured loan decrease interest rate on another side there is the loss of assets. Same with unsecured debt loan their isn’t requirements of collateral but have higher interest rate and strict credit requirements.
Debt consolidations are boon for regular payers but some economist has criticised it and has suggested better alternatives for that debt settlement program, liquidation, and card balance transfer are some options.
I am RUCHIKA DHRUWEY, pursuing my graduation in journalism and mass communication from Guru Ghasidas central university, Bilaspur (C.G). besides that, I am a blogger.