Using personal loans for repaying your existing loans

Posted on Tuesday, November 28th, 2023 | By IndusInd Bank

Many individuals opt for a personal loan as a strategic way to tackle their accumulated debts for a variety of important reasons. The challenge of managing several loans, each with distinct interest rates and repayment schedules, can quickly turn into a financial mess. However, one strategy that you can consider to streamline your debt is using a personal loan to repay existing loans.

This approach, known as debt consolidation, can offer several advantages such as loan repayment, emergency funds and more. It includes advantages such as simplified payments, potential savings on interest, and improved financial management.

The basics of debt consolidation

Debt consolidation involves taking out a new loan, often a personal loan, to pay off multiple existing debts. By consolidating your debts, you effectively combine them into a single manageable loan. This new loan can be used to settle your existing debts, leaving you with just one monthly payment to make.

Benefits of using a personal loan for repaying existing loans

Streamlined payments

Managing multiple loans with different due dates can be overwhelming. By consolidating your debts with a personal loan, you simplify your financial life by making just one payment each month.

Potentially lower interest rates

If you have high-interest loans, such as credit card debt, using a personal loan to consolidate these debts could lead to significant interest savings. A personal loan often has lower interest rates compared to credit cards and some other types of loans.

Fixed repayment schedule

A personal loan usually comes with fixed monthly payments and a set repayment schedule. This predictability can help you budget more effectively and avoid the uncertainty that can come with variable interest rates.

Potential credit score improvement

Successfully consolidating and managing your debts can positively impact your credit score. As you repay the new personal loan on time, your credit score might gradually improve.

Improved financial organisation

Consolidating your debts can help you gain a clearer picture of your financial situation. You will have a better understanding of the total amount owed and the interest being paid.

Considerations and tips

Here are certain things that you should keep in mind before applying for a personal loan:

Assess your total debt

Before deciding to use a personal loan for debt consolidation, calculate your total debt amount and compare it with your ability to repay a new loan. Ensure that the new loan terms are favourable and that you can comfortably afford the monthly payments.

Check the loan terms

When considering a personal loan for debt consolidation, pay attention to the interest rate, repayment tenure, and any associated fees. Make sure that the new loan terms are better than or at least comparable to your existing debts.

Avoid new debt accumulation

After consolidating your debts, it’s important to avoid accumulating any new debt. Focus on responsible spending and budgeting to prevent falling into the same debt cycle.

Consult financial advisers

If you are uncertain about whether debt consolidation is the right option for you, consider seeking advice from financial advisors or credit counselling services. They can provide personalised guidance based on your financial situation.

Benefits of getting a personal loan from IndusInd Bank

• IndusInd Bank’s loan application process is straightforward and 100% paperless.
• The bank offers an instant personal loan at attractive rates starting from 10.49% p.a.
• The flexible loan tenure ranging from 12 to 48 months allows you to choose the tenure as per your requirement and need.
• The approval and disbursal process usually takes just a few hours.

IndusInd Bank ensures a quick and hassle-free process while cutting the need for hefty paperwork. You can apply for a personal loan from the comfort of your home and get the amount disbursed to your account in just a few hours.

To ensure that repaying the loan does not become a burden on your finances, you should choose an amount that fits comfortably within your budget. A personal loan EMI calculator can help you determine an EMI amount that does not disrupt your monthly finances.

Advantages of using a personal loan EMI calculator

Using a personal loan EMI (Equated Monthly Installment) calculator can provide you with valuable insights and advantages when considering borrowing funds via a personal loan. Here are some of the key advantages of using a personal loan EMI calculator:

Accurate payment estimations

A personal loan EMI calculator accurately estimates your monthly instalment based on the loan amount, interest rate and loan tenure. This ensures that you have a clear understanding of how much money you need to budget for each month.

Financial planning

The calculator helps you plan your finances better by giving you a comprehensive overview of your repayment schedule. You can adjust the loan tenure or amount to find a payment plan that aligns with your financial capabilities.

Budgeting assistance

Knowing your monthly EMI enables you to create an accurate budget that incorporates your loan repayment. This helps you manage your expenses and ensure that you can comfortably meet your financial obligations.

Interest calculation

The EMI calculator also provides insights into the total interest you will pay over the life of the loan. This information helps you assess the overall cost of borrowing and make more informed decisions about the loan amount and tenure.

Quick decision-making

Instead of manually performing complex calculations, an EMI calculator provides instant results. This streamlines the decision-making process and helps you compare multiple loan options efficiently.

Conclusion

Using a personal loan to repay existing loans through debt consolidation can offer several benefits, including simplified payments, potential interest savings, and improved financial management. However, it’s essential to carefully assess your financial situation, compare loan terms, and ensure that the consolidation loan aligns with your budget and goals. By approaching debt consolidation strategically, you can take significant steps toward achieving financial stability and reducing the burden of multiple debts.

Apply for an online personal loan with IndusInd Bank and start reaping the benefits today!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.