A debts consolidation loan can be particularly useful if you have multiple loans with high interest rates under your name. It’s a low-interest plan that is designed to consolidate all your debt loans into a single contract so you only have to pay a monthly fixed repayment amount under one payment channel. If you have too many loans, debt consolidation can help you fast track your way to a debt-free future. With a single interest rate on the line, it makes it more affordable as you would only need to focus on repaying that one loan. Here are three reasons why you should consider debts consolidation or a debts consolidation loan.
- Pay all your bills at one go
It can be depressing and frustrating to have to pay off so many bills at once – especially if the bills are all repayment for personal loans borrowed from different licensed money lenders or banks. If this sounds awfully familiar to you, consider consolidating your loans so you can combine your separate bills into one and put your mind at ease. Having a debts consolidation loan in place is a step forward towards a debt-free life as it allows for an easier journey towards financial freedom and having an end date in sight. Remember to keep track of the one payment by automating your payments to be made on the same date of each month. Work towards paying off your loans on time before it is due. Once you do it diligently, you’ll pay off your consolidation loans in no time.
- Flexible return terms
Generally, a debts consolidation loan in Singapore can go up to $50,000 and last up to a 10-year loan term. However, application approval, as well as the terms and conditions, entirely depend on the borrower’s loan amount, credit score and ability to repay the loan. With regards to the terms and intent of the loan, debt consolidation loan is much more flexible. You will be able to use debts consolidation loans to pay off existing credit card overdrafts, personal loans, housing loans, or medical expenses. For instance, if you have a credit card with a $6,000 limit and you have a personal loan with a $10,000 limit. You can consolidate these debts into one loan with a $16,000 limit and then use the loan to pay off both debts at once.
Many borrowers make the mistake of taking up a debts consolidation loan plan with a tenure that is not within their financial means. When considering consolidating your loans, it is essential that you budget well and consider a payment term that allows you to repay the loan on time, without adding any more financial burden that will eat into your daily expenses. You do not want to have to take up another loan to pay off your consolidation loan as that is counterintuitive, so make sure you are set on being able to pay the monthly loan on time.
- Improve your credit score
It is a common belief that taking up a debts consolidation loan will badly affect your credit score. This is true to a certain extent. As with all types of loans, your credit score will naturally decrease if and when you take up a debt consolidation loan as your overall debt-to-income ratio will be higher than before. However, the impact will not be as great as you might think. You will still be able to rebuild your credit score once your new consolidated loan is paid off consistently and promptly. This is especially true if your previous defaulted debts have already negatively impacted your credit score. You will be able to have a better credit score after combining the loans and paying off the consolidated loan on time and in full.