Is Taking A Personal Loan A Good Idea To Consolidate Debt?
Have you ever heard about consolidating debt? If you are struggling with a lot of debt, then taking a personal loan to consolidate it is a great option. You have to combine different kinds of debts in order to arrange it into one solid monthly payment. By taking a personal loan, you can pay off all of your existing loans and pay a monthly payment to the lender. But is it a good option? Let’s look at the pros of getting a debt consolidation loan.
Pros of taking a personal loan to consolidate debts
There are a few benefits of taking a personal loan such as:
- Interest Rate Gets Reduced
Taking a personal loan is beneficial as the interest rate for personal loans is less than any other kind of debt interest. You have to talk to your lender in order to check whether you qualify for a low-interest personal loan or not.
- Improving Your Credit Score
Every earning individual has a credit score. The credit score depends on an array of factors. One of such factors is the amount of debt piled up. Your credit score goes down when you have a lot of debt to repay. It increases your credit utilisation rates. However, a personal loan can help you out in such a scenario. Your credit utilisation rates go down and your credit score increases as you pay monthly payments on time.
- Less Messy
You need to get fast loan in Singapore. Why? Because it will make the things more organised. It is difficult to keep track of all the debts and pay their monthly dues. However, if you have to pay only one monthly payment for a personal loan, it is easier to keep track of it. You will not miss any deadline and land into trouble.
- Timeline For Repayment Is Fixed
The timeline of personal loan repayment is fixed. This means that you will have a rough idea on when you will become debt-free. It will help you to plan accordingly for the future.
- No More Variable Rates
If you do not want to deal with loans that have a variable rate, then a debt consolidation loan is the right choice for you. There are several types of loans where the loan rates increase or decrease, depending on the market trends. However, that is not the case with a personal loan. The interest rate remains fixed in this case.
- It Is Unsecured
A personal loan is a form of unsecured loan. As a result, you do not have to submit any kind of security in exchange for it. The personal loan will be issued to you on the basis of your credit score and income credentials. Hence, there is flexibility in how you choose to spend the loan amount.
- EMI And Tenure Period
You have variability with the EMI amount as well as the tenure period. In most cases, the tenure period to pay back the loan lies between 24 months to 60 months. There is a lot of flexibility as you can choose to pay back the loan whenever you want to. Moreover, you can even choose the EMI amount after reviewing your income.
- Loan Amount
Personal loans are beneficial as you can take high amounts as a loan through it. You will need a big amount as a loan if you plan on paying all your other debts at once. The minimum amount for a personal loan in Singapore is $5000. The maximum amount is four times your income.
When Should You Consider Getting A Personal Loan?
You can only think of getting a personal loan to consolidate your debts when you meet these criteria:
- Your Credit Score Is Comparatively High
Having a lot of debts has a negative effect on your credit score. However, if your credit score is still high enough, you can still get fast loan in Singapore. How will you know if your credit score is high enough or not? If you can get low-interest rates for your personal loans! It is advisable to have a credit score of over 760 in order to get a low-interest personal loan. Only then it is a feasible option to get a personal loan to consolidate all your debts. If you have not missed out a lot on paying your debts off or you have paid it on time, your credit score should be relatively high.
- When Your Spending Is In Control
You have to get your spending in control before you think about getting a personal loan to consolidate your debts. Debts from sources such as credit cards are an indication that you have a habit of spending a lot. Hence, you need to get it under control if you want to consolidate your debt. Otherwise, the personal loan that you will take will act as an enabler. You will spend it on other things instead of paying back your loans. It will land you up into more debt, and you do not want that.
- Plan To Pay Your Debts Off
It would help if you had a plan on how to pay off your debts. It is not easy to pay off debts, and hence, you need to be prepared for the struggle. You need to have a five-year plan before you take a personal loan for debt consolidation. Try to be honest with yourself if you do not have the means to pay off the personal loan, no need to apply for it. It will land you into more trouble.
Now that you have a clear idea about why personal loans are a good idea, what are you waiting for? It is a great option when it comes to debt consolidation. You should definitely look for one when you meet the criteria for applying for a personal loan. Do not keep your debts pending. Sort out your life and get a debt consolidating personal loan in Singapore as soon as possible!