How Debt Consolidation Works
Debt consolidation replaces multiple debts with a single loan. The goal is to get a lower overall interest rate and simplify payments.
Benefits of Debt Consolidation
- Lower Interest Rate: Especially if consolidating high-rate credit cards
- Single Payment: Easier to manage one EMI
- Fixed Payoff Date: Clear end date for debt-free status
- Improved Credit: Better utilization ratio
Things to Consider
- Total interest paid over the loan term
- Monthly payment affordability
- Processing fees and charges
- Prepayment penalties on existing loans