What are Debt Consolidation Loans?

Having multiple loans or debts can sometimes cause serious stress. You may miss out on the due dates and often forget the interest you need to pay on each loan. That’s where debt consolidation comes in. When you opt for debt consolidation, you agree to combine all your debts into one. This way you make it easier for yourself to not only manage the loans but also reduce the overall cost of repayment. Yes, with debt consolidation loans, you can have better loan terms to simplify your financial life.

Let’s learn more about debt consolidation loans with the following guide. Here, we will discuss what debt consolidation loans are, how they work, the benefits, the application process, and much more.

What is a Debt Consolidation Loan?

When you avail a loan to combine all your existing loans and debts, it is called a debt consolidation loan. Whether you have credit card debts, instant personal loan or medical bills, you can always take out a personal loan for debt consolidation to pay them all off. Once the loan is approved, you will not have multiple EMIs to take care of but only one payment to make every month. As mentioned earlier, this can save you time, reduce stress and also may lower your interest rate.

So, if you wish to save money and manage your finances better by having a lower interest rate than the current debts, then go for these debt consolidation loans.

How Debt Consolidation Works

With debt consolidation, you take out a bigger loan to pay off all your existing loans. So, debt consolidation works by replacing multiple debts with one single loan. It happens in the following steps:

Step 1: Before anything else, you need to first calculate the total amount of your debts.

Step 2: Once you know how much you owe, you apply for a personal loan for debt consolidation from a bank or an online lender.

Step 3: If your loan is approved, then the loan amount will be used to pay off your existing debts.

Step 4: You now repay the new loan through fixed monthly payments with new loan terms.

Note: Depending on the terms of the loan, you can even reduce the total interest you pay.

Types of Debt Consolidation

There are various types of loans that can be consolidated, depending on your needs and preferences. Here, we talk about the most popular ones:

High-Interest Personal Loan for Debt Consolidation: You can borrow a lump sum to pay off all your debts and repay the loan in fixed installments.

Student Loan Debt: You can consolidate both government and private student loans into one, at a lower interest rate.

Medical Loan Debt: If you have multiple medical loans, you can consolidate them into one and manage your healthcare-related debt more efficiently with a single repayment schedule.

Benefits of Debt Consolidation Loans

The major benefits of debt consolidation loans are:

• You avail simpler finances as you can combine all debts into one, thereby, making it easier to manage payments.
• Enjoy lower interest rates with a new loan and save money in the long run.
• If you pay off your multiple debts in an ideal manner, then it is a perfect way to boost your credit score.
• When you have a single payment to take care of, you can be stress-free and not overwhelmed by multiple due dates and amounts.

How to Apply for Debt Consolidation Loans

If you have decided to apply for a personal loan for debt consolidation, here are the steps you need to follow:

• Check your debts and write down all the loans you want to consolidate including their amounts and interest rates.
• Research about lenders and look for banks or online platforms like CASHe that offer debt consolidation loans.
• Check your credit score as a good score can only help you get better loan offers.
• Fill out the application form and provide the necessary documents like proof of income and ID.
• Submit the loan application.
• Once approved, get the loan amount disbursed directly into your bank account, which you can use to pay off your debts.
• Repay the new loan in fixed monthly installments.

Eligibility Criteria for Debt Consolidation Loans

If you wish to qualify for a debt consolidation loan with CASHe, you need to meet the following criteria:

• You must be at least 21 years of age
• You need a stable income to show you can repay the loan
• Your total debt should be manageable compared to your income
• You should have a steady job or business income
• A score of 650 or higher is usually preferred

Documentation Required to Apply for Debt Consolidation Loans

There are certain documents you need to provide when applying for a personal loan for debt consolidation and these are:

• Identity Proof: Aadhaar card, passport, or driver’s licence.
• Address Proof: Utility bill, voter ID or rental agreement.
• Income Proof: Pay slips, bank statements or tax returns.
• Loan Details: Statements showing the debts you plan to consolidate.
• Employment Proof: Offer letter or business ownership proof for self-employed applicants.

Conclusion

This is what a debt consolidation loan is all about. Now, if you are looking for a personal loan of up to ₹3 lakh with an easy repayment schedule, download the CASHe app right away. With CASHe, you can consolidate your debts and avail an instant personal loan to meet your financial requirements.

Apply today and get the loan amount disbursed within a few hours.