What are Debt Consolidation Loans and How to Get One?

Debt consolidation is a popular process of taking one loan to pay off two or more unsecured loans or debts. Instead of managing multiple debt sources such as pending credit card bills, student loan, personal loan, outstanding monthly EMI etc., it is easier to take one debt consolidation loan and manage the same. This leads to help you, where you can manage your financial stuff in an appropriate manner. You just have to pay single monthly installment, rather than paying many. This eliminates the chance to miss any installment or forget the repayment date etc. The person or the borrower can focus on controlling the high rate of interests.

Types of Debt Consolidation Loans

Debt Consolidation through Secured Loans:

You can avail this option and you can consolidate all your unsecured outstanding debt to one kind of secured loan by availing loan against property, loan against car, Gold, life insurance policy, mortgage loan, equity, cash value etc. Secured loans for consolidating other outstanding debts allow a borrower to repay at lowest interest rates. It is also provided at the most affordable rate in the industry. If such loans are availed against real estate, then it helps you get the tax deductions, too. Such loans are less risky in nature.

Debt Consolidation through Unsecured Loans:

If you do not want to put a pledge on your collateral, than this is a good option to choose. This is a common option to use. The banks offer higher rate of interest in comparison with secured loans. However, there are many banks and lenders available in the market that provides interest at affordable rates than usual. The borrower must check with bank or lender if at all, they provide any schemes or offers in terms of low interest rates or no interest rates for first month or special offers for the company you work with etc.  The main advantage of unsecured loans is that there are no collateral which are put at risk.

Eligibility Criteria for Debt Consolidation Loans

Here are certain basic eligibility criteria that need to be met to avail the debt consolidation loans.

  1. The age of the debt consolidation loan applicant should between 21 years to 60 years.
  2. If the applicant is salaried, then his or her minimum income should be of ₹ 30,000 rupees monthly. The salary bracket, however, will be depending upon the city, in which you live. For example, if a person is living in a metro city, then the salary bracket will be on a higher side in comparison with non-metro city. Also, if you are working in a well-known and top Multinational Company, than the salary bracket will be lesser than the person, working in start-up firm.
  3. The applicant should be staying in the city since at least 1 year
  4. The person should owe the work experience of minimum 2 years.
  5. The applicant has to submit certain documents such as address proof, identity proof, bank statements, salary slip (If salaried), etc.

Process to apply for Debt Consolidation Loans

There are certain easy steps that need to be followed to avail the debt consolidation loan that can be explained as follows. The lenders are providing all the needed information on the website. The borrower can go through the needed information and access the same. The borrower can conduct the cost versus benefit analysis to choose the best deal that is available in the market.

Once, the person chooses the deal, the person can follow certain simple steps that is available on the website. The borrower has to initially fill the form that is given on the lender’s website. The form consisting of basic information such as age of the applicant, address, income details, location, etc. The applicant has to further provide the needed documents such as address proof, identity proof, offer letter of the current company or salary slip etc. when the form is completely filled, the same goes to the eligibility algorithm, where the application can be processed. Here, the application can be analyzed and the decision is being taken that whether the loan will be approved or not.

The approval of the loan is dependent upon several criteria, such as credit rating or CIBIL score of the applicant, financial history, income of the applicant etc. The person can check such eligibility criteria online before he or she applies for the loan. If the applicant falls under the eligibility criteria, then the chances of the sanctioning of the loan gets higher. However, if the applicant does not fall under the eligibility criteria, then the chance of the loan rejection increases.

While applying for debt consolidation loan or for that matter any loan, it is essential that a person pays attention on the CIBIL score as well because it is one of the most important aspects that decided the sanctioning of the loan. If the CIBIL score is less than 620, than the same falls under average or poor credit category. If a person holds a bad credit score, than it is not advisable to apply or go ahead for the debt consolidation loan because the same may result in even worsening your rating score in CIBIL. The applicant can check his or her CIBIL score online by simply visiting the website.

Once the loan application gets approved, the respective department of the bank shall contact the borrower and confirm the details of the approval and for the signing of the loan agreement to finish the process. The person gets the credit of the loan amount directly in his or her bank account. The borrower can further get in touch with customer care executive for the assistance during entire process of the loan.

The debt consolidation loans are very attractive but at the same time, it is essential for the borrower to analyse all the needed parameters before opting for the debt consolidation loan. The borrower must focus on strengthening the financial savings to get rid of any kind of debt.

 

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