If you are looking to consolidate your existing debt, you should keep in mind a few things. You should firstly work out the amount that is required. You should calculate the total outstanding debt amount and then deduct the same from the amount that you can arrange from your existing investments or surplus money. You should then endeavor to find out the best credit options for consolidating your existing debts.
Personal loans come with swift disbursal procedures along with low rates of interest in tandem with flexible loan tenors. Personal loans are the most popular options for consolidating debt. Personal loans come with interest rates between 11-24% based on factors like credit score, income and professional record. The loan tenors can go up to 60 months or 5 years and once approved, disbursal is usually completed within a period of 7 days. Existing personal loan customers can opt for a balance transfer feature to get their loan switched to a different lender at a lower rate of interest complete with a longer tenor. This may help you get extra money for repaying your debts.
You can consider applying for a loan against property, which can be taken against commercial or residential properties. The rates of interest vary from one lender to another. Loan tenors can go up to 15 years and the amount can be anywhere between 50-65% of the value of the property. The repayment potential and age may be taken into account when the loan amount is sanctioned. Top-up loans are offered to existing home loan customers and these can be great options for repaying your existing debts. You can consider a loan against securities, which will be an overdraft facility against the value of your invested securities. Lenders can sanction up to 85% of the total value of the securities based on their type.
Interest rates can go upwards from 11% per annum on the amount that is withdrawn. This is a good option for those who have long-term and considerable investments by way of equity mutual funds, shares and insurance policies. These can be tapped for garnering low cost funds without having to make any compromises on long-term aspirations. Always check your credit score and report prior to applying for a debt consolidation loan from a financial institution.
You should always repay older debt as the first priority. Once you have obtained a new loan, you should repay unsecured loans such as loans against credit cards, personal loans and so on prior to repaying secured loans like car loans and home loans. This is because unsecured loans come with higher rates of interest and repaying these will improve your overall creditworthiness and the credit mix, i.e. the ratio between unsecured and secured loans, which will enhance your credit score greatly. You should repay your debt consolidation loan on a regular basis in order to avoid any penalties and also maintain a healthy credit score.