Getting a personal loan to pay off credit card dues is called a debt consolidation loan. Besides reducing annual interest payments, it can also induce savings in the long run. Moreover, you will not have to sweat over managing multiple debts.
There are times when taking on further debt to pay off your credit card dues makes sense. When you avail a personal loan to pay off debt on your credit card, it is referred to as a debt consolidation loan. It is here to understand that once you take on a personal loan, the debt doesn’t go away; it just moves around from one place to another. At the end of it, you will have to pay the lender what you owe. The whole idea behind availing a Debt Consolidation Loan is to get a better bargain on the credit card interest rates than what you are currently paying, coupled with a flexible repayment tenor better suited to your financial scheme.
For example, Bajaj Finserv’s Personal Loan for Debt Consolidation sanctions loans up to Rs.25 lakhs, at competitive interest rates, spread over a flexible repayment period of 24-60 months. This makes it easy for you to consolidate multiple credit card dues under one comprehensive loan that is disbursed to your account within 24 hours after document verification. Further, its Flexi Loan facility offers the provision to withdraw as much as you need from within the sanctioned limit and pay interest only on the borrowed amount.
You can use the Personal Loan Eligibility Calculator to instantly check whether you qualify for such a loan.
Taking on a personal loan for debt consolidation has its perks. Read on to know more:
● Reduces annual interest outgo
The principal argument that tilts the scales towards a debt consolidation loan is that it considerably lowers rates of interest on the total debt. A personal loan can be your ‘go-to’ instrument if you want to save on the annual interest outgo. The reduced interest rate will help you to settle more principal amount every month, thereby ultimately helping you bring down the total debt amount you would’ve had to pay.
● It bands together multiple payments
Multiple credit cards and their respective debts can demand extra attention and handle on your part. On the other hand, banding all credit card dues into a personal loan allow you to focus all your energy on that one debt. This helps as you get more time and room to settle the loan for good faster, compared to what you’d have done had you stuck with different piecemeal debts.
At the same time, make sure your credit card dues don’t go up once you’ve consolidated them under a personal loan. The point is that all the benefits of a debt consolidation loan might be nullified if you start carelessly racking up smaller balances on your cards.
Having said that, your objective should ideally be to get out of debt and stay that way. Try and address the underlying issues which might be the root of this circumstance.
● It reduces monthly payables
A personal loan to consolidate all debts can bring down EMIs. Often, the monthly payables on one consolidated loan will be lesser than the sum of all EMI’s that have arisen from multiple debts on credit cards. Another advantage, besides reduced monthly payables, is that this will also help you pay more towards the principal component of the personal loan.
You can also use the Personal Loan EMI Calculator. Just fill in the categories and instantly check your payable EMI.