With a Debt consolidation loan you end up paying a single monthly payment instead of multiple smaller installment amounts. However, having to manage a single loan is not the only benefit of a debt consolidation loan over multiple smaller loans. Debt is but a liability and as a debtor you must learn ways to reduce your liabilities. Can a debt consolidation loan help? Let’s find out in this article. Here we enlist top six benefits of debt consolidation loan.
1. Lesser number of premiums to worry about
Inarguably the first advantage is that a consolidation loan reduces your pain areas. Imagine the attention you need to pay in managing multiple loans and their premium dates and not missing out on any installment as it would be bad for your credit score and its overhead and concern. With a single premium you are free from a lot of overhead and risk of missing out on any payment on time. This is a great measure to keep your credit score out of risk.
2. End up paying less money
Some debt consolidation agencies have schemes where you end up paying less overall amount to your creditor agencies as compared to what you would have paid otherwise. The principal is simple; you are paying interest rates to the debt consolidation companies instead of other creditors. Thus, while they absorb all your smaller loans they also gain the interests that come with the loan amount. It’s a win-win situation for both debtor and creditor.
3. Saves you from bankruptcy
When you are under a financial burden, every penny matters. Apart from the installments you also need a sustainable amount of money to live your normal daily life. In such scenario where you cannot afford the high interest rate of some of your loans, you would like to have a plan that could ease the interest rates. In such cases a debt consolidation loan can do you a favor where you can have lesser interest rates at the cost of an increased number of installments. So basically you can consolidate debt amount overdue on yourself based on your repayment ability. This is a great step to prevent yourself from bankruptcy and live a normal life unaltered by pressure of loan amounts.
4. Available with poor credit score
To obtain a traditional loan you must have a very good credit score. However with a debt consolidation loan there are peer to peer lending options where your credit score is not the stopper. This makes the whole consolidation process less cumbersome and usually the interest rates are less which is exactly what a debtor wants.
5. Flexible APR rates
Many loan consolidation companies are flexible in offering the interest and the APR rates. It all depends on the summation of entire loan amount and the tenure you would like to set for repayments.
6. Multiple options while choosing the debt consolidation agency
A consolidation loan can be a secured or an unsecured loan. You can go for the home equity line of credit or go with the traditional or non-traditional ways to get the consolidation loan. There are online lenders, peers, lending clubs and reputed bodies like International Association of Professional Debt Arbitrators (IAPDA) which offer less interest. There are even LIC policies which take care of your debt in return of your premium toward their policy. In the end you also get a money back amount depending on the kind of policy you enroll for. With so many options the debt consolidation loan becomes the best option available in tough financial times.
However in the process of debt refinancing you should make sure you don’t end up risking your home or let’s say extending the tenure of the repayment due to less and cheap rates of interest. In this article we have listed the top six benefits of the debt consolidation loan but it does not mean that a consolidation loan is the ultimate solution for all financial turmoil. There are associated pros and cons with every service and you must analyze if the pros outweighs the cons.

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