It becomes pretty stressful when you have high-cost debts. These debts can even affect your short and long-term financial goals. If you are servicing high-cost debts, the mounting EMIs and their interest rates will force you to empty your savings to repay the debts. It is not the only option because you can also take up a lower-cost personal loan for debt consolidation.
If you are having multiple debts, then you would have to pay multiple interest rates. You will have to pay a lot of extra liquidity every month as the interest rate. You can reduce multiple debts by opting for debt consolidation. The best method for consolidating multiple debts is a loan against property. Debt consolidation means that you can wave off all the high-cost debts by taking a personal loan.
- Amount Required- For the first step, you can begin with calculating your total outstanding debt and then subtracting the amount that you can arrange by redeeming your current investments from the total debt. You must prefer low-yield investments such as debt funds or financial institutions fixed deposits for this purpose as the rate of returns of these loans is much lower than the loan rates.
- Available Credit Options- Once you are clear about the loan amount that you need, then you have to search for the best loan type based on the interest rates and tenure.
Personal Loan- Personal loans are considered to be the most popular debt consolidation instrument. It is the perfect option for credit cardholders where they are charged approximately 11%-24% by the lender based on your income and credit score. The tenure could go up to 5 years and you can receive the loan disbursal within 7 days.
loan against securities- Lenders provide up to 85% value of the value of your securities based on their type. Usually, the interest rates are somewhere around 11%. This is a great option for people with long-term investments such as equity funds, shares, insurance policies, and much more.
Check your credit score before applying for a loan- A higher credit score enhances one’s chances of securing the required amount as a home loan. When you check for your credit score before applying for a loan, you will be able to detect errors or any frauds in your credit reports and also take actions to correct them. When you fetch your credit score from credit bureaus or online lending marketplaces, you will also get to know about several customized loan options based on your credit score.
- A quicker way to get debt free- On the basis of your financial profile, your loan will be approved within a span of 3 days when you have applied for LAP. The amount that you receive from LAP could be used to pay off all the other debts immediately. This will free you from multiple debts and all you have to carry is a single debt.
- Easy to manage- You need to accurately plan your finances while handling multiple debts. You have to keep in control of your paychecks, savings and any kind of extra expenditures in order to pay multiple debts on time. You will have to make sure that your account has a specific balance maintained in order to pay the EMI or else you will be charged extra for late fees. When you think about consolidating all your debts through LAP, then you will have to pay only one EMI every month. It gets much easier to plan for a single EMI, then planning for multiple EMIs.
- LAP (Loan Against Property)- As per the loan against property EMI calculator, it is considered to be a secured type of loan where you will have to keep your property for a mortgage with the financial institutions in order to get a loan. Due to this reason, the interest rates of LAP (loan against property) are lower as compared to the other unsecured loans.
- Prioritize prepayments of older loans-Once you receive the new loan, you must pay off all the previous unsecured loans such as credit card loans, personal loans, and many more before you pay the secured loans such as home and car loans. Unsecured loans have higher interest rates and when you pay off unsecured loans your credit score is also improved.
You must ensure regular repayment of the new loan after replacing your older loans in order to maintain your credit score and also avoid penalties. You can set instructions in your primary account due to which the EMI amount will be deducted automatically from your account on the pre-specified date.