How does loan consolidation work?

Answer

A:

Loan consolidation is the process of combining multiple existing loans or debts into a single new loan. Instead of managing several different EMIs, you pay just one monthly installment to one lender.

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Why Do People Choose Loan Consolidation?

• Simplifies repayments by having only one EMI.

• Often lowers the overall monthly payment by extending the loan tenure.

• Can help reduce interest rates if the new consolidated loan offers better terms.

• Makes managing finances easier and reduces chances of missing payments.

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How Loan Consolidation Works:

1. Assess Your Existing Loans: Collect details of all the loans you want to consolidate (personal loans, credit cards, etc.).

2. Apply for a Consolidation Loan: Approach a bank or NBFC offering consolidation loans.

3. Approval & Disbursement: Once approved, the new lender pays off your existing loans in full.

4. Single Loan Repayment: You start repaying the new loan with one EMI every month.

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Important Things to Keep in Mind:

• Interest Rate & Tenure: Check if the new loan offers a lower interest rate or more affordable tenure.

• Processing Fees & Charges: Some lenders charge fees for consolidation loans. Factor these in.

• Impact on Credit Score: Applying for a new loan may temporarily affect your credit score.

• Debt Discipline: Consolidation doesn’t erase debt; disciplined repayment is key.

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Is Loan Consolidation Right for You?

If you find managing multiple debts stressful or want to reduce monthly payments, consolidation can help. However, evaluate the costs carefully before proceeding.

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For expert advice on loan consolidation or debt management, contact:

visit: www.legals365.com
call:  +91 9625961599

Advocate B.K. Singh and the team are here to assist you!

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