Debt consolidation is when you combine multiple debts into a new loan that has better terms, like a lower interest rate. The money from this new loan is used to pay off the other debts, allowing consumers to clear a small debt by taking one larger loan. This helps save on interest and finance costs. Instead of making various payments to different creditors, the borrower now only has to make one payment. Debt consolidation can be applied to unsecured loans, such as education loans, credit card balances, and personal loans.
How Debt Consolidation Works:
To consolidate debt, the borrower requests a personal loan from the bank. Once approved, they use the loan to pay off their existing balances. After clearing the previous debts with the new loan, the borrower makes a single monthly payment for the new loan.
Advantages Of Using Personal Loans For Debt Consolidation:
Here are some key reasons why personal loans are a great choice for consolidating your debts:
Affordable Repayment: With a personal loan, you can manage and pay off your debts in a cost-effective way, avoiding the hassle of handling multiple payments. Applying online is easy.
No Need For Collateral: You can obtain a personal loan without requiring any collateral or a guarantor.
Quick Approval And Processing: Once your application and documents are verified, the approval process is swift, ensuring timely access to the loan.
Instant Disbursal: The approved loan amount is immediately transferred to your savings bank account.
Repayment Flexibility: Choose a repayment tenure of up to six years, tailoring it to your financial capacity. You can also request additional funds based on your repayment capability.
Documents Needed For Debt Consolidation Loan
To apply for a debt consolidation loan, you'll need the following documents:
Identity Proof: Submit KYC documents like a PAN card, voter ID card, or driver's license that display your name and picture, helping authenticate your identity.
Address Proof: Provide documents, such as an Aadhar card, passport copy, electricity bill, or phone bill, to prove your Indian citizenship and residence. This helps determine your loan amount based on your city of residence.
Repayment Ability Documents: For quick approval, showcase your financial ability to repay the unsecured loan. Submit salary slips from the past two months and your salary bank account statement for the last three months.
Employment Proof: Your employee ID card serves as proof of job stability and employment status. Employment with a reputable MNC or private/public company may lead to a higher loan sanction at a competitive interest rate.
