Having multiple debts to repay is the stage where one wrong move can easily put you in a debt trap. The number of EMI dates and a large amount of income going into debt repayment can demoralize at the start of the month. However, you can consolidate all your outstanding debts into one by opting for anyone of the various debt financing options available. Some of the popular loan types for consolidating your debt are:
1. Debt Consolidation Loan: These loans are designed specifically to help borrowers combine various debts into one. Such loans usually have a low rate of interest. But they might have longer tenure, which may lead you to pay the same overall interest amount or even more.
2. Home Equity Loan: When you have significant equity in your home, then you can use that as collateral to avail of a loan to consolidate your debt. Opting for this loan type would mean you are putting your home in the line to cover for your credit card and other accumulated debts. Failure of repayment might lead to the lender claiming your house to cover for the loss.
3. Credit Card Balance Transfer: You can also opt for transferring outstanding balances from all your credit cards into one. However, be mindful of the fact that most times the concessional rate on credit card balance transfer is for a limited period, after which standard rates apply.
4. Personal Loan: You can also opt for a personal loan, as it is an unsecured loan, so no collateral required. Although availing a personal loan would be beneficial only if the rate of interest is low, a higher one is likely not to give you enough benefit.
1. Debt Consolidation Loan: These loans are designed specifically to help borrowers combine various debts into one. Such loans usually have a low rate of interest. But they might have longer tenure, which may lead you to pay the same overall interest amount or even more.
2. Home Equity Loan: When you have significant equity in your home, then you can use that as collateral to avail of a loan to consolidate your debt. Opting for this loan type would mean you are putting your home in the line to cover for your credit card and other accumulated debts. Failure of repayment might lead to the lender claiming your house to cover for the loss.
Also Read: Options available to consolidate your loan
3. Credit Card Balance Transfer: You can also opt for transferring outstanding balances from all your credit cards into one. However, be mindful of the fact that most times the concessional rate on credit card balance transfer is for a limited period, after which standard rates apply.
4. Personal Loan: You can also opt for a personal loan, as it is an unsecured loan, so no collateral required. Although availing a personal loan would be beneficial only if the rate of interest is low, a higher one is likely not to give you enough benefit.
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