Multiple Debts Vs. Single Loan
People around the world borrow money from banks for various reasons and most individuals repay their loans. However, some do get into a debt trap when they fail to manage their finances properly. If you are struggling with multiple debts because of money borrowed to pay medical bills, fund shopping sprees, or deal with unexpected emergencies and it becomes a little overwhelming, it could impact your physical as well as emotional health in a big way. However, you can tackle the situation by taking one step at a time. Read on to know more as to how you can pay off debt even if you feel that it is impossible.
What Is Multiple Debt?
Multiple debts refer to the money you have borrowed from different sources for various reasons. You might take a personal loan from a bank to pay your child’s school tuition fee. As you start repaying this loan, a need for more funds might arise because of a medical emergency. Now, you are forced to borrow either from a bank or use your credit card to manage the situation. If you have a couple of credit cards and you are required to use them for whatever reasons, you end up having multiple debts and debtors.
How Can You Convert Multiple Debts Into A Single Loan?
One of the best options available to you for converting your multiple debts into a single loan is a financial strategy called debt consolidation. Personal loans and credit card debt are classified as high-cost borrowings. They can cause a lot of stress and even impact your financial situation in a negative way. Such debts potentially affect both your short-term and long-term financial goals as well. When you have high-cost debts to deal with, the interest payments and EMIs keep mounting and life becomes a struggle. It even starts reflecting on your performance at work.
Debt Consolidation Process
Debt consolidation is defined as the process of converting all of your debts (personal loans and credit card outstanding) into one single debt. Typically, debt consolidation is implemented by way of a new personal loan that pays off all your debts. You are then required to pay back the new loan instead of making separate payments to multiple lenders. This means that you will be able to do away with the stressful and the never-ending payment cycle that you have to go through month after month.
Huge Advantages of Debt Consolidation
The three major advantages of debt consolidation are as follows:
Single monthly payment
It is very difficult to keep up with the payments against multiple debts, especially when the due dates are different and the minimum amounts to be paid are not the same. Consolidation brings it down to just one easy payment every month.
Lower interest rate
When you are faced with repayment of multiple debts, it might seem as though you are trying to shoot a moving target. A debt consolidation loan often comes with a lower interest rate and it enables you to reduce the interest paid.
Become debt-free faster
If you take the minimum payment route, it may take years for paying off your credit card debt. Debt consolidation reduces minimum period.
Note: CompareGulf is an online market research consultant, our experts would support you in choosing right financial option and also loan products from the market.